Corruption for the Family Firm

This chapter explores corruption in family firms, emphasizing how their hybrid structure—blending formal business systems with informal family dynamics—may contribute to higher corruption risks. While family firms can naturally reduce agency-based corruption by aligning ownership and management goals, it may also enable corruption that benefits the entire firm. Through the lens of corporate crime theories, the chapter examines how centralized authority and the informal cultural norms of the family coordinate corrupt practices within the firm. It highlights the concept of a corrupt organization, where firms pursue illicit strategies not for personal gain but for the organization’s interests, which in this case align with the family’s interests. The Korean chaebol system serves as a central case study of the chapter, illustrating how inheritance conflicts, weak internal controls, and political collusion can lead to a form of family corruption, called corporate state capture, that goes beyond a corrupt organization. Despite their economic significance and ethical aspirations, family firms are especially vulnerable to corruption due to their structure, governance patterns, and familial loyalty, challenging the Weberian ideal of rational-legal corporate order.