Ethical Risks and Resolutions in Korean Financial Institution Scandals

Abstract

Purpose The objective of this study is to analyze the characteristics of the ethical issues in several scandals in Korean financial institutions, and to introduce resolutions to mitigate such ethical risks. Design/Methodology/Approach This study examines ethical issues from the perspective of the ethical standards of the CFA Institute and the Korea Financial Investment Association, and analyzes these issues through Kerr’s reward model (1995). Findings It was found that recent Korean financial scandals comprised numerous ethical problems which were to the detriment of investor interests in pursuit of banker interests. A better reward system emphasizing client interests and values should be introduced, along with binding standards of professional conduct for member firms in the financial industry. These efforts should be made based upon financial institution ethical cultures. Research Implications This research is a ground clearing exercise, offering ethical risk mitigating methods for Korean financial institutions which have earned distrust from a series of financial scandals. With sparse studies in this field, this paper will shed light onto trust enhancing efforts in the financial sectors in Korea.