[EDITORIALS]Get Tough With State-Run Firms

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[EDITORIALS]Get Tough With State-Run Firms

"We have been severely criticized for 'parachute appointments' at state-run companies," Jeon Yun-churl, the Minister of Planning and Budget, said recently to the ruling Millennium Democratic Party. Mr. Jeon asked the party to "help us regarding the issue." Mr. Jeon had pointed out in March that it is controversial to appoint a person who cannot read even balance sheets as auditor of a state-run firm. We appreciate Mr. Jeon's courage, because it is not easy for an incumbent minister of the current administration to say such a thing even if it is considered that he is in charge of general reform in the public sector. But we worry about a situation under which Mr. Jeon has to say such words, because politicians must frequently and tenaciously solicit special favors to take the positions, otherwise he would not say such a thing.

There have recently been a series of reports that politicians at the ruling MDP and the United Liberal Democrats are making movements with their eye on posts in state-run firms. Among the chiefs at the 550 state-run companies or associations, who are appointed directly or indirectly by the government, 40 to 60 officials' term of office expires by June. Rumors are rising regarding the top posts at Korea Gas Maintenance & Engineering Co., Korea Securities Depository and Korea Water Resources Corp. There are rumors that politicians are enthusiastic in soliciting favors as they reckon that if they fail to take a post right now, they would not get another chance under the current administration.

Of course, not only politicians would do such things. The government ministries have sent a number of its officials to state-run firms in order to "solve stagnation in personnel movement due to accumulating officials." The most important reason why the reform in state-run companies has been an issue for such a long time is because of the parachute appointment's through which persons with no expert knowledge in the business and no ability in management have taken positions. The chief executive officers and executives of state-run companies who have been appointed through such procedures have focused on currying favor with the government ministries and politicians who have the right to intervene in personnel appointments, rather than managing well the companies. For that reason, reform in the public sector, which should have preceded financial restructuring and corporate reform, has actually been conducted slowly. Accordingly, the government's will for reform has become doubtful.

A fundamental solution to reform management at state-run firms is privatization. Improvement in corporate governance should be also considered. Currently, a non-standing director system and the company president recommendation committee system are used, but they have not worked well.

The government plans for a second measure to reform management at state-run companies. But, it is questionable that the management of state-run firms will actually be reformed, unless politicians, who see taking a post at a state-run firm as a "trophy of election," and the government's high-ranking officials, who regard state-run companies as subordinate institutions of the government, alter these views.

The system of reprimanding state-run company executives for their mismanagement should be reinforced. The government has delayed the system for drawing up a list of the 30 major state-run companies. It was a wrong decision because it has damaged the system of evaluating the performance of state-run company executives.
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