A socio-Legal corporate governance model: Analyzing South Korea’s social enterprise promotion act using public-Private partnerships

Can South Korea reregulate and reconstitute its current conglomerate-based, export-dependent “Korea, Inc.” model towards a more socio-legal corporate governance model more inclusive of socio economic stakeholder equality concerns? By enacting the Social Enterprise Promotion Act (SEPA), a law expressly aimed at boosting domestic social enterprises through public-private partnerships (PPPs), South Korea became one of the few if only economies in the world to pass a social enterprise law at the national level (rather than at a state or governnment agency level, as in the US or UK). Historically, South Korea’s greatest economic strength in the post-1945 period was its ability to create a significant manufacturing and export sector dominated by large conglomerates (referred to as “chaebol,” such as Samsung, LG, and Hyundai) that still dominates the economic landscape today— creating “Korea, Inc.” Such corporate governance model allowed South Korea to become an economic success story based on its achievements in the twentieth century, at the risk of being highly export dependent. However, South Korea has recently put forth regulatory efforts towards creating a new economic path based less on manufacturing and exports by large chaebol (the “Korea, Inc.” model) and greater focus on smaller-size social enterprises that can provide economic growth while also achieving certain socio-economic objectives, including furthering “economic democratization” and socio-economic inclusion by uniquely utilizing PPPs. As such, the nation’s policymakers enacted the Social Enterprise Promotion Act (SEPA). The main objective of SEPA was to provide a regulatory framework for the establishment, funding and regulation of social enterprises. This article provides a regulatory and socio-economic corporate governance perspective regarding SEPA, which includes policy arguments related to the benefits and barriers of the act, in addition to survey results from respondents in South Korea related to social enterprises and similar entities. If successful, SEPA would ideally foster a more sustainable twenty-first century South Korean economic ecosystem, based less on export-dependence, and more on incentive-taking and innovation, while improving the nation’s overall socio-economic conditions by utilizing a unique socio-legal corporate governance model within Asia’s fourth largest economy.