Men of Honor : Military CEOS and Directors in Korea

In this paper, we examine whether the presence of ex-military board directors affects firms' financial policies and ethical behavior in Korea, a country where the military has a unique historical role in society. Despite prolonged exposure to military rule during their formative years, firms with ex-military-officer CEOs and inside directors are substantially less likely to commit corporate fraud. Moreover, the positive association between Chaebol business groups and fraud is significantly weakened in the presence of ex-military directors. These managers and insiders also adopt more conservative managerial policies in normal times but take more risks during crisis periods. However, when these directors are appointed primarily for external networking purposes, their presence has little effect on a firm's corporate policies or ethical behavior. Thus, a director with exposure to military values does appear to enhance corporate ethics, but only when he holds an appropriate position to do so