Shin-gate: misunderstanding the power of shame in South Korea.

Ghosh, Koushik

Shame is not perceived the same way in different cultures, nor is it used the same way. How does that difference across cultures influence our interactions in public space? How does it affect our business interactions? It has been argued, especially in the wake of Asia's financial crisis in 1997, that there was a lack of shame in Asian cultures after the economic crash. The same kind of argument has been presented in the United States following the financial crisis which began in 2008. President Obama has tried to shame the Wall Street crowd. Economic commentators have spoken of banks having no shame. The question is, how important is shame in American culture as compared to Asian cultures? In the discussion that follows, this query will be addressed by focusing on one Asian country, South Korea, and a particular case that has been labeled "Shin-gate."

Shame Across Cultures

Though the issue described above might best be studied using empirical methods, obtaining data involving shame is rather difficult. Fortunately, stories and anecdotes can serve as great case studies for understanding and analyzing what role shame plays in different cultures. Sometimes in cross-cultural exchanges, loss of reputation and other damage due to a scandal can indeed create such shame that it leads to loss of income and other types of monetary losses. It is also possible that a society that uses shame as a "sorting" mechanism to distinguish good businesses and business practices from bad may have great difficulty in communicating the power of this practice. Its relevance and its effectiveness as a tool of public policy may not be apparent to another culture where the practice is not applicable. In such cases, the society that uses shaming may attempt to translate losses emanating from shame into monetary terms, since the society that uses shame may see this as the only effective way of communicating across cultures. A lot can be lost in this kind of translation, and a society that uses shaming as a tool may not achieve the purpose of communication with a society that does not. In fact, resorting to financial damages may actually destroy the possibility of better communication in the future.

The South Korean Case: Shin-gate

Dongguk University, a famous 103-year-old Buddhist university, has been in the news recently. In 2008, Dongguk filed a $50 million lawsuit against Yale University for "reckless" and "wanton" conduct, and for defaming, publicly humiliating and shaming Dongguk in the eyes of the Korean public, thus costing the university millions in contributions (TheNew York Times, 10 October 2009). The incident that led to the lawsuit has become infamous in Korea as "Shin-gate."

In 2005, Dongguk hired Shin Jeong-ah, an art professor and purportedly a graduate of Yale. Controversies over her credentials soon arose, and Dongguk requested verification from Yale. Yale failed to check its documentation carefully despite this request, and confirmed that the degree from Yale was valid--even though the Yale administrator's name was misspelled in Ms. Shin's document. Rumors persisted nonetheless, and Dongguk pressed the matter again with Yale in 2007. This time, Yale rectified its mistake and announced that Ms. Shin had no degree from Yale and that her documentation was false. Yale, however, denied that it had ever received any prior requests from Dongguk.

The American Case: Goldman Sachs, Bernie Madoff, and Bear and Stearns

If one considers the liabilities incurred due to a loss of reputation in the case of Dongguk University and compares that with the fact that Goldman Sachs just handed out multi-million dollar bonuses to its employees after receiving financial assistance from the U.S. government, then it becomes abundantly clear that shame is not a powerful sorting mechanism in the United States (TheNew York Times, 5 November 2009). In fact, shame has little role in areas such as business in the United States. The scandals of Wall Street have not resulted in any mechanisms to sort people out of Wall Street professions. Instead, the ability to make money and lots of it, without impunity, is seen as a particularly American way of conducting business (The New York Times, 10 October 2009).

In the absence of shame, the only option to control such rapacious and socially damaging behavior lies with the courts, as demonstrated by the Galleon case, the Madoff case, and the Bear and Stearns case. Yet, the only two cases that are going forward out of these three are those involving Bernie Madoff and Galleon investments. Madoff has been convicted and some Galleon executives may meet a similar fate (TheNew York Times, 31 October 2009). While it is conjectural at best, it is possible that shame may follow on the heels of their conviction in the United States.

The Bear and Stearns executives, on the other hand, were recently acquitted and cleared of wrongdoing. The courts decided that it was not possible to establish that the executives in this case misled the public knowingly, despite the existence of troubling internal emails. As far as shame goes, the Bear and Stearns case is particularly telling. The acquittal absolves the executives of all wrongdoing, and hence of responsibility (The New York Times, 11 November 2009). If one cannot prove criminality in a court of law, that is, if one cannot clearly establish criminal wrongdoing, it is nearly impossible to impose any other forms of sanctions on behavior in businesses in the United States. Now that the Bear and Stearns's executives have been cleared, they can legitimately say that they bear no responsibility for what happened and hence have absolutely no reason to be shamed. Thus, shame becomes a non-issue unless one can at least establish criminality.

Norms, Sanctions, Regulation and the Courts: Different Strokes

Shame functions as a social tool by managing norms and imposing sanctions. The only recourse left for cases in which shaming has been rendered ineffective and ceases to function is the use of courts and regulations (i.e. use the judicial and legislative systems), and reliance on them exclusively to manage bad behaviors. Regulations are considered extremely costly by most American businesses, and as the Obama administration attempts to consider how to regulate the economy to prevent another meltdown, the lobbyists of the banking and financial sector have descended in droves on the nation's Capitol. The goal of these lobbyists is to influence members of the U.S. congress so that new regulatory regimes are not adopted, since regulation, which is enforceable in the courts, is a substitute for shame in the United States.

Regulation, however, can be imposed in both lax and stringent ways, thus leaving some room for discretion. Shaming, too, can be pursued with discretion. However, once regulation is indeed enforced, and lack of compliance is observed, sanctions must typically ensue, and in many cases they must be imposed through the legal system. Using shame does not necessarily trigger sanctions since it is not administered by a system as formal as the courts but rather by a broad jury, such as society, thus allowing for correction and recovery from lapses. Relying on a practice of shaming lessens the necessity for a regulatory-legal framework to weed out bad business practice, and it can be a far less costly way to regulate a society, impose sanctions, and articulate and reinforce norms.

Shame May Be a Cheaper Alternative, but May Cost Yale Dearly

It is understandable that less affluent countries and societies may use shame as a substitute for costly regulation from a purely rational, cost-effective point of view. In dealing with other cultures and societies, institutions in the United States should be cognizant of both the function and importance of shame as a powerful regulatory mechanism. If institutions in the United States, such as Yale, fail to understand the importance of shaming in a country like South Korea, it is very likely that they have displayed a poor understanding of South Korea's institutions, not just its cultural practices. One can and does continually misunderstand cultural practices in cross-cultural exchange, creating great possibilities for embarrassment; but disrespect for the institutions of another culture is a far more egregious offense. It seems that in the case of Shin-gate, Yale may have done exactly that. The lawsuit against Yale reflects South Korean dissatisfaction and frustration with Yale, as well as Dongguk's inability to communicate to Yale that an institution's shame in South Korea is a powerful sanction, and one that involves significant damages both in terms of lost social trust and financial damage. Dongguk's inability to convey that loss of reputation is a powerful blow and Yale's unwillingness to accept it has landed them in the courts. If Yale had accepted that shaming has occurred in this case, and that it is a powerful regulatory tool in the case of South Korea, it would have displayed an understanding of this culture and a particular practice. In this case, Yale's inattention and negligence has led to severe sanctions for Dongguk, since Dongguk has broken a powerful norm despite the fact that it tried its best to not do so by getting help from the only party in this conflict that could have helped, namely Yale.

Yale was ultimately responsible in this incident, since it was the only party in this dispute that had access to information that could have prevented further damage when Dongguk first inquired. Institutions are important; and while shame has almost no function in the United States as a regulatory mechanism, it is important not to ignore its power in other cultures as one pursues business with them.

References

Coleman, James S. 1990. Foundations of Social Theory. Cambridge, Mass: The Belknap Press.

The New York Times. "After Error by Yale, Anger and a Court Fight Ensue." 30 October 2009, sec. A.

--. "Have Banks No Shame?" 9,10 October 2009, sec. B.

--. "Lapses Helped Scheme, Madoff Told Investigators." 31 October 2009, sec. A.

--. "Madoff is Sentenced to 150 Years for Ponzi Scheme." 30 June 2009, sec. A.

--. "Some Wall Street Year-End Bonuses Could Hit Pre-Downturn High." 5 November 2009, sec. B.

--. "Two Bear Stearns Fund Leaders Are Acquitted." 11 November 2009, sec. A.