(Yonhap Editorial) Lax management at public corporations needs bold reforms

SEOUL, Oct. 18 (Yonhap) -- The National Assembly's audit of public corporations
shows excessively lax management and high moral hazard at public firms. The scale
of debts at public companies rose significantly, but many public companies paid
huge bonuses and used substantial amounts of money as welfare expenses despite
their chronic deficits.
The Korea Asset Management Corporation, for instance, paid out 10 billion won
(US$8.94 million) as welfare expenses to its employees without the resolution of
the board of directors. The Korea Gas Corporation paid 55.9 billion won as
dividends although the accumulated amount of uncollected bills surpassed 4
trillion won.
Lawmakers also harshly criticized the lax management of the Korea Minting and
Security Printing Corp. (KOMSCO) and other public corporations. KOMSCO increased
its bonus payments to employees by 26.8 percent last year from a year ago despite
the aggravated financial standings. Korea Electric Power Corp., meanwhile, paid
out 378 billion won in bonuses despite the huge exchange rate losses it suffered
from the issuance of overseas exchangeable bonds in 2006, which amounted to 498.6
billion won.
SH Corporation, under the wing of Seoul City, saw its debts increase about
five-fold to 16 trillion won last year from five years ago. The company paid
bonuses worth 20 billion won during the same period. Meanwhile, the number of
employees at 59 public firms under the Knowledge Economy Ministry whose yearly
salary exceeds 100 million won increased to 2,979 this year from 1,105 in 2006.
Such lax management in public companies weakens the national competitiveness and
increases the people's tax burden.
Despite the government's express determination to reform the public companies,
such loose management and moral hazard has not been corrected, indicating grave
problems.
The method of appointing chief executive officers is one major problem. The CEOs
appointed by orders "from above" cannot resist the reckless demand for welfare
payment by labor unions as they lack necessary management capability. Thus, the
CEOs cannot carry out necessary reforms in their corporations and pursue
responsible management.
In order to reform public firms, the appointment of CEOs under orders from higher
government agencies should be eradicated. The evaluation system of public
corporations' management performances should also be improved.
We urge the government to tighten its supervision of public enterprises and carry
out effective reforms in those companies.
kts@yna.co.kr
(END)