Apologizing CEOs: New law that holds chiefs accountable for accidents has become biggest fear

Building safe work environment is a must, but just punishing CEOs won't work for that change, critics say

SPC Group Chairman Heo Young-in (far left) apologizes for the recent death of a factory worker during a press conference at the company`s headquarters in Yangjae, southern Seoul, on Oct. 21. (SPC Group)

Bowed heads, a mumbled apology and camera flashlights.

The public apology issued last week by the head of South Korean food and beverage giant SPC was any businessperson's worst nightmare.

Chairman Hur Young-in of the food and bakery giant apologized for the death of a 23-year-old worker who was crushed by a sauce mixing machine at a factory affiliated with SPC during an overnight shift.

The chairman does not just face public humiliation and a nationwide boycott of his company’s products, he also faces a lawsuit filed by the deceased employee’s family on charges of violating the Serious Accidents Punishment Act, a new law that went into effect in January and has become a source of fear for businesses since.

If found guilty under SAPA, he could face more than a year in prison or a fine up to 1 billion won. Legal experts say the law could put CEOs behind bars for up to 30 years.

SAPA intends to prevent serious workplace accidents by imposing heavy criminal and administrative liability on companies and their executives.

But some legal experts pointed out the law lacks details in stating the link between the workplace accidents and the CEO's responsibility.

“The law needs to be clear about how the CEO’s failure or refusal to uphold safety codes was a main cause of the workplace disaster,” professor Kwon O-Sung of Sungshin Women's University said in a recent press conference at the National Assembly last month.

“The CEO’s gross negligence must be taken into consideration as well. The law should remain, but it has to be tweaked.”

Data shows that Korea in fact, does need to improve its workplace safety measures.

A total of 432 people died in Korea from workplace-related accidents in the first eight months of the year, according to the Ministry of Employment and Labor. The figure is only nine people less than for the same period last year.

Separate data released by the Ministry of Land, Infrastructure and Transport on Wednesday showed a total 61 people died in construction sites from July to September this year.

In terms of the number of workplace-related deaths per worker Korea improved last year to 0.43 per 10,000 laborers from 0.52 in 2017. But this is far higher than the Organization for Economic Co-operation and Development average of 0.29 for 2021. Germany's figure was 0.15, while Japan reported 0.13 as of last year.

The Korean government will announce a five-year road map to reduce workplace-related deaths and accidents below the OECD average. At the same time, it is looking for ways to “alleviate” the law, under President Yoon Suk-yeol's instruction.

Yoon has been calling it “excessive punishment regulations that stifles corporate activities.” The law was proposed by left-leaning minor Justice Party and supported by the then ruling Democratic Party in January, 2021, before Yoon came to power.

But labor unions want to keep the law unchanged, saying that there's been no actual changes yet and no one has been punished.

“Business leaders are saying that preventive measures come before punishment and are calling for alleviation of SAPA. But they are actually not doing anything to improve the law or the system,” a spokesperson for the Korean Confederation of Trade Unions said.

Foreign businesses, for their part, say that SAPA might become a major hurdle in Korea’s ambitions to become a global economic and financial hub, adding to the already tight regulations.

“This is a very important time for Korea in the sense that we need more foreign investment and further enhanced national competitiveness, and the enforcement of the SAPA will certainly be a considerable burden for foreign-invested companies," AMCHAM Chairman & CEO James Kim said.

“In Korea, regardless of nationality, CEOs are forced to be personally responsible for issues that they cannot even control. There must be clearer regulations in place to prevent unjust punishments for the CEOs, for cases where there is no clear evidence that a serious accident has occurred due to intentional or malicious violation by the leadership."

"But, at the same time, American companies should also ensure that they follow all of the relevant policies of South Korea. I also believe that these companies have an obligation to bring in experienced CEOs who can handle the complexity of operating in a country of this size.”

With the law remaining debatable, Lee Byung-tae, business professor at Korea Advanced Institute of Science and Technology, said such safety laws must look at the core of the problem. It is meant to bring about a systematic overhaul rather than just punishing CEOs, he said.

“There is something called a Peltzman Effect. The law should provide incentives that could bring about changes in their behaviors rather than focusing on the punishment,” Lee explained.

“It’s when safety measures are implemented, people's risk perception decreases, leading people to make riskier decisions. Safety laws don’t always guarantee safety and punishing CEOs in this sense could birth side-effects."

By Jung Min-kyung(mkjung@heraldcorp.com)