[FORUM]This Is No Way to Run a Company

The JoongAng Ilbo has its own guidelines for journalistic ethics. According to those guidelines, staff reporters are forbidden to invest in stocks. It is a self-imposed ethical code created out of the possibility that the journalistic profession might enable reporters to obtain inside information unavailable to other potential investors.

Despite the guideline, I do invest in a certain company. And that I do not do secretly. In fact, a great many other people do the same with me. Every month, I put some of my money, which I consider precious, into the company.

Recently, I grew worried about a rumor that the company was having a hard time. I checked around and discovered that the rumor was true.

Four years ago, the nation's economy suddenly deteriorated and the company's financial condition became shaky. Before then, the company had regularly posted a profit, though small. In a slumping economy it was natural that the company began to post losses. But serious problems began to be heard from the subsidiaries of the company.

The company's annual revenues now reach 10 billion won ($7.8 million), but the company's spending exceeds the revenues. The company's subsidiaries have brought claims on bad debts and invested in troubled financial institutions.

The company has insisted that the subsidiaries would make gains, by reselling the claims for higher prices later and the prices of the shares in the ailing financial institutions will rise. The company has guaranteed 9.9 billion won in bonds, which the subsidiaries issued.

The problem is that the bonds issued by the subsidiaries will become due next year. The repayment of the maturing bonds and the payment of interest on the bonds will reach 970 million won. But the subsidiaries are having difficulties collecting funds that they put into troubled financial institutions. They have collected only 25 percent. Accordingly, the company decided to roll over the maturing debts worth 450 million won. The parent company plans to assume the debts of the subsidiaries, if needed.

But the parent company's conditions are not good, either. In addition to the surety obligations, the company's liabilities reached more than 12 billion won at the end of last year, due to the mounting losses from it business. Though the parent company must repay its maturing debts and pay interest on its total debts, it plans to assume the subsidiaries' debts. The market expects that the company will redeem the debts by making new debts.

The company is doing business in unusual ways. The company had said that it would cut jobs by 13 percent, for restructuring. But the company actually reduced only 4 percent, as if it thought it had already weathered the most difficult storm. Even during times of mounting losses the company raised wages by 13 percent last year and 16 percent this year.

The company explained that it had to adjust wage levels, based on what other profitable companies were doing. The company plans to raise wages by 10 percent next year.

In addition, the health fund that the company operates has nearly collapsed. The company plans to put more than 300 million won of its money into that fund.

It's hard to stop putting money into such a company. Unfortunately, you cannot withdraw from the company until you emigrate to another country. You cannot replace the chief executive officer of the company until 2003.

The company, of course, is the Korean government.

The units of billions, which I referred to above, are actually 10 trillions.

President Kim Dae-jung knows this company's problems. But he doesn't seem fully aware of how serious the problems are, considering that the government has been expanding budgets for classroom construction, welfare programs and other services.

The president's ignorance may have come from government officials, who have said that the national finances would be balanced by 2003. Those same officials told the president that anxiety about a potential financial crisis should be dismissed. We sorely miss officials who can tell the complete truth to a company president.

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The writer is an editorial writer of the JoongAng Ilbo.

by Kim Joung-soo