[EDITORIALS]Stock options’ bad image

Woori Bank is in conflict with its largest shareholder, Korea Deposit Insurance Corp., over a plan to grant 1.65 million shares to top executives as stock options. Of the 18.6 trillion won ($18.6 billion) in public funds received by the bank, it still owes 11.5 trillion won. The bank’s board of directors, who pushed the plan at a recent board meeting, overlooked the likely public objection: How can they think about having a stock option party when they have yet to pay their debt to the people? They deserve to be criticized.
The bank’s request is not without reason. It recorded a net profit of 1.997 trillion won last year, the largest in its history and overwhelmly larger than those of its competitors; Kookmin Bank’s net profit was 555.3 billion won, and Shinhan’s was 844.1 billion won. Moreover, the value of the stock options to be granted amounts to only 20 to 30 percent of those offered by its rivals. The directors also argue that at a time like this, it has to use stock options to attract capable managers and boost its share price, which will enable it to repay more to the government.
But the bank should pay attention to the chilly public reaction to its decision. Of a total of 165 trillion won in public funds so far funneled to businesses and financial companies, only 70 trillion won has been recouped. Last month, many businessmen were arrested who had lived luxuriously off money they’d swindled from companies that received public money, whether by maintaining slush funds or by cooking the books. Because of the prolonged economic slump, stock options simply have a bad image.
It is too late to settle this quietly. If the bank reverses the public notice on stock options it registered at the New York Stock Exchange, it will certainly create distrust in the market. It would be difficult for the Deposit Insurance Corp., to vote down the stock options at the March 28 general shareholders’ meeting, since it would amount to a vote of no confidence in management and would lead to resignations.
The bank and Korea Deposit Insurance Corp. should stop their emotional confrontation now and look for an alternative. It is urgent to find a way to avoid the moral implications of offering stock options before paying off a public debt, while still offering incentives to executives to work harder. Rather than stock options, contracts that increase compensation based on individual achievement might be considered as an alternative next year.