[Venture Biz 2] Moral crisis

[Venture Biz 1] Some act like scams [Venture Biz 3] Living together, or collapsing together?

Is it a problem if the president spends company money?

President K of venture company A has been told by company employees to resign. The problem was excessive spending for entertainment. It was known that he spent more than 10 million won at a time to entertain his customers. He also used first-class seats for overseas travel and stayed at a suite in a deluxe-class hotel.

Company B is jointly established by several venture firms. President L of the company spent company money as if it were his own pocket money. With the money borrowed from the company, he purchased larger apartment and even sent money to his son, who is studying abroad. The investors fired him, but the company is suffering from serious aftereffect of drain of key members of the company.

A company president, who is a graduate of the Korea Advanced Institute of Science and Technology, paid his family's wedding expense of 60 million won with the company card and created a hidden bar in his office.

Korean venture companies are suffering from serious moral hazards. As witnessed in the bankruptcy of Korea Digital Line, the moral hazards of some venture companies are fanning a crisis.

Top management purchases luxury cars and spends money from investors for entertainment. Now the companies are faced with financial difficulties, and there is fighting among the management, employees and shareholders. The CEOs are seeking further investment, but the market has turned its back on them.

An employee at one venture company said that the stock option he used early this year has become worthless.

"I felt regret for joining such a company when I heard that president spent a lot of money every night for his own entertainment," the employee said.

There is a suspicion that some venture businessmen in the fields of finance and entertainment have engaged in capital flight overseas or enjoyed luxurious lifestyles with the money from investors. Some of them are known to have luxurious homes in Los Angeles and Paris. Also, it was learned that Korean venture businessmen are competing for purchases of luxurious houses around Stanford University and Silicon Valley.

They have lie about their technological capabilities to attract investors.

One venture firm specialized in construction business-to-business activities told the press that it had achieved 10 billion won in sales in six months of foundation. However, there were no sales, and shareholders are considering whether to file criminal charges against the company's president.

Han Sang-Bok, a partner in a venture consulting firm, said that it is unthinkable for a CEO of a venture company with only several billion won in paid-in capital to spend more than 10 million won a night as entertainment expense.

"To overcome the crisis in the venture industry, the moral hazard prevailing in the industry needs to be stamped out first," he said.

Kim Tae-Han freewill@donga.com