Controversy of Fairness
Most of the foreign software companies in the nation were excluded from this year's study on software companies, because they did not disclose information as limited liability companies. Limited liability companies are not required to announce their performance results, or to hire external auditors to verify their accounts. Thus, the exemption has ignited controversy over fairness between local and foreign software companies in the country.
On July 3, the Korea Software Industry Association (KOSA) announced the results of its study on software companies with sales of more than 100 billion won (US$98 million). IBM Korea was the only foreign firm to be included, while other major companies like Oracle Korea, Microsoft Korea, SAS Korea, and Adobe Korea were excluded from this year's study.
According to last year's study, Oracle Korea, with 1,070 employees, turned over 703.923 billion won (US$695.919 million) in 2013. Microsoft Korea, with 480 workers, recorded 600.817 billion won (US$593.991 million) in sales.
In response, an official at KOSA remarked, “We were able to get data of some foreign-based software companies last year, because some information was made public. And information reported to credit rating agencies was also available.” The official added, “But there was no way to get access to the data this year, since foreign software companies blocked related information.” The KOSA explained that foreign software firms refused to disclose information on sales and their workforce.
Local firms argue that the fact that foreign software companies are not obliged to release information is reverse discrimination. In general, local companies are changed into limited liability companies to grow further when the size of the business reaches a certain level. However, foreign-based companies do not need to be switched into limited liability companies, as they are engaged in the business just the way the parent company overseas does. In the end, foreign-based firms are utilizing the privilege of limited liability companies aimed at protecting firms with insufficient capital. Limited liability companies are exempted from hiring external auditors or disclosing information.
An industry source said, “The software industry is not alone in controversy over limited liability companies. Foreign companies like Google, Facebook, or other firms headquartered in foreign countries are also caught up in controversy.” The source added, “Local firms have social obligations and are subject to regulations at home and abroad, in line with their growth. In contrast, foreign companies are not regulated by the Korean government. They don't have any social responsibility, either, due to a lack of information.”
The software industry thinks that there is no way to get access to information on major foreign software companies, since they are registered as limited liability companies. To address the problem, the introduction of an external auditing system of limited liability companies with a certain level of assets is believed to be necessary.