By Boye Lafayette De Mente

Western style business kyeyak (keh-yahk) or contracts are a relatively recent phenomenon in Korea, and for the most part go against the traditional cultural grain. Prior to modern times (which basically did not start in Korea until the 20th century), detailed written contracts were the exception. Most commitments made between individuals, the government and its suppliers, and between manufacturers, merchants and retailers, were primarily verbal understandings.

The commitments that individuals and organizations made to each other were traditionally based on family and kinship ties, and on personal contacts that often went back for several generations. The system was held together by Confucian morality, which included a strict sense of obligation and responsibility based on "face," social class and tradition. Shinsa hyopchong (sheen-sah h'yohp-chohng) or "gentlemen's agreements," were the rule.

An important part of this cultural scenario was that Koreans were not comfortable with making precise commitments of any kind. They preferred to keep things general so relationships could evolve as circumstances changed. Generally speaking, Koreans were more interested in the emotional and friendship aspects of relationships than in trying to tie down specific details. The Korean perspective was that as long as the parties to any relationship were sincere and gave precedence to personal and humane elements, they would be able to deal with the various circumstances that arose and the relationship would be solid and achieve its goals.

Because of this cultural attitude, verbal commitments were only as good and as binding as the relationship between the people involved. It was therefore often the case that as much or more effort went into sustaining friendly, cooperative relationships as in carrying out any duties or obligations involved.

The traditional Buddhistic view of the cosmos as cyclic helped program Koreans to think in broad terms and to be less concerned about precise details-something that now varies from being a serious handicap to being a significant advantage. Koreans often choose to ignore details of contracts and other matters in the interests of long-term goals. Westerners, who have been culturally conditioned to emphasize details and the here-and-now, often clash with their Korean counterparts in working out and following through on agreements.

The Korean attitude toward kyeyak has become more "Westernized" since the 1960s when the country began transforming itself into an economic powerhouse. But there is still an easily recognizable element of traditionalism in both negotiating and servicing contracts, even among the most international of Korea's largest and most successful corporations. Koreans often use the term kyeyak so (keh-yahk soh) or "written contract" to infer that a contract may be no more permanent or important than the piece of paper it is written on.

One of my Korean colleagues says that when Koreans sign contracts they are merely engaging in a formality that is meant to indicate that they have a relationship with someone. They do not mean to bind themselves to detailed, precise obligations and actions that are so dear to the heart of Western businesspeople. He added that Koreans look upon kyeyak as "symbols" of relationships rather than as something that defines and controls relationships. "We regard contracts as general guidelines that set perimeters around which we work," he said.

While Westerners interpret contracts from an exact legalistic viewpoint, Koreans generally interpret them in moralistic terms that are based on factors that Westerners regard as totally irrelevant. Koreans take into consideration the relative size and strength of the firms involved, the length of time the two parties have been involved with each other, any special difficulties involved in fulfilling the requirements of the contract, the relative advantages accruing to the two parties, unexpected changes in the market, and so on.

In its Korean context a kyeyak is more of a general statement of purpose and goals than a detailed document that binds the parties to absolute requirements. The fundamental aim of a Korean-style contract is to formally acknowledge that both parties to the agreement will do whatever is necessary, and within their capabilities, to ensure that neither side is disadvantaged or loses in any way. Korean kyeyak therefore have a substantial degree of built-in flexibility that makes it possible for the two parties to continuously adjust to the changing circumstances.

Koreans regularly point out that their kyeyak, as well as their whole approach to business, rests on a philosophical foundation of injong (een-johng), or "compassion for the plight of others"-which they add, or imply, is typically missing from the Western way of doing business. Koreans regularly accuse Westerners of putting profits before relationships, thereby causing unnecessary friction between companies and instability in the marketplace.

This amorphous view of business and contracts does not necessarily apply to all Korean businesspeople. A few, especially among those who have had extensive educational and work experience abroad, are as detail-minded and as diligent about living up to contractual provisions as their Western counterparts. But fundamentally, Koreans dispute the rationality of the all too typical Western style contract that attempts to eliminate ongoing adjustments in the relationship. They point out that circumstances are continuously changing, and unless they are free to adjust their actions both parties will soon be at a serious disadvantage.

This presents a serious challenge to all businesspeople in or doing business with Korea, Koreans as well as foreigners. The traditional Korean solution to this problem is to establish strong personal ties with key individuals in all of their business relationships, and then work to make as sure as possible that they can count on these personal ties to get fair treatment as circumstances change.

The Korean rationale is certainly valid, but what it does not state is that when they adjust their actions to account for changing circumstances their primary purpose is to protect their own interests. Only the rare Confucian paragons will give as much thought and concern to the interests of their business agents or partners as they do to their own.

The honesty, integrity, loyalty and diligence of Koreans is intimately tied to their "face," to the degree of shame they would suffer if they failed to exhibit any of these qualities at the appropriate time. Foreign businesspeople seeking to qualify Korean partners and sign contracts with them should first of all try to measure their "face." The more face they have to lose the more likely they are to be trustworthy in every respect. And by the same token, if they have little face to lose, their ethics are likely to be loose and easily discarded.

Foreign companies wanting to establish long-term contractual relationships in Korea are well-advised to get professional help in Koreanizing their contracts to the point that their Korean partners can sign them in good faith and will make a sincere effort to abide by them, while making very sure that their own interests are protected.

Foreigners who work out important, formal agreements with Koreans should be prepared to mark the occasion with a celebration that includes drinks and speeches. These events traditionally end with all the participants simultaneously raising their arms into the air and shouting manse! (mahn-say!) three times. Manse literally means "ten thousand years," and is the Korean equivalent of "Hip! Hip! Hooray!" and the Japanese word banzai (bahn-zie).

Throughout the last 500 years of Korea's premodern history its society functioned primarily on the basis of Con-fucian precepts that were an integral part of the culture. People absorbed these precepts naturally as they grew up. Their behavior was determined by this cultural and social programming rather than by written laws. In this environment, all relationships were based on a combination of obligations and shinyong (sheen-yohng) or trust. Each person was expected to conduct himself or herself according to a minutely prescribed etiquette based on the im-mutable factors of sex and age, as well as social class and position.

The basis for social conduct, including the foundations of Korean morality, was the family unit. While the same etiquette and morality generally applied to all families, it was more of a personal thing than a universal thing, which had the effect of confining trust to family and to a limited number of others with whom one had some kind of personal relationship.

Shinyong based on family and personal ties remains a key factor in Korean life, particularly in the areas of personnel recruitment in business and government service, and in management in general. This has led Korean social scientists to list categories of people according to "trust scales" that went from 100 percent trust down to zero trust. Generally, the only people who were rated at 100 percent on these scales were parents, spouses, children, and brothers and sisters. Next in line were nephews and nieces who come in at 99 percent. Cousins were rated at 97 percent and other relatives at 96 percent. High school classmates came in at 97 percent, college classmates at 85 percent, and members of the same church at 95 percent. People with the same family name, as well as those whose ancestral homes were in the same part of the country, were ranked at 70 percent on the trust scale. Other Koreans who were strangers got a very low five percent. Lowest of all were foreigners with whom there was no relationship of any kind. They got a very conspicuous one percent.

Korean consultant and go-between H.J. Chang (Semco International) and others say these assessments are now much too narrow, but that "trust scales" ontinue to serve as the base from which Koreans contemplate, start, and manage any kind of venture involving employees or partners. In many common situations, these precise relationships take priority over all other considerations. They play some role in virtually every enterprise in Korea. In addition to a trust scale applied to individuals, high schools and colleges in Korea are rated according to a prestige scale. These two scales are generally combined when it comes to evaluating employee candidates. Until the early 1990s most larger Korean companies made a practice of hiring graduates from just one or two schools in order to take advantage of the relationship ties that exist among the alumni. Now, hiring practices are more likely to also be driven by individual qualifications.

Given this shinyong factor in Korean life, newly arrived foreign businesspeople who have no prior relationships with individual Koreans, or with Korean schools, are seriously handicapped. Old-timers say that it takes around three years for newcomers to be accepted and become productive, even when they are very much aware of the obstacles they face and work diligently to overcome them. This time-frame may be shortened, however, by establishing a network of connections months in advance of actual entry into Korea. This can be done through KOTRA's Korea Trade Centers, Korean embassies, consulates, banks, universities, service organizations (Kiwanis and Rotarian contacts), professional associations, local groups of expatriate Koreans, the foreign subsidiaries of Korean companies, etc.

Whatever the situation, foreigners should keep in mind that business and other relationships in Korea are invariably based more on personal trust and confidence than on contracts, laws or such principles as equality, fairness and justice.

"Kyeyak" and "Shinyong" are entries from "Korea's Business and Cultural Code Words," by Boye Lafayette De Mente, who has been intimately involved with China, Japan, Korea and Mexico since the late 1940's as a member of a U.S. intelligence agency, student, journalist, editor, consultant and author. His over 40 books include works in the "Business and Cultural Code Words" series on Japan, China and Mexico, as well as "Korean in Plain English" and "Korean Etiquette & Ethics in Business," now in its third edition. For more information check out the internet site (http:// www. dancris.com/~phxbooks/).