[Outlook]Lift the dead weight

I once met a senior executive from a public company. His business card had the title “auditor” and, unusually, there was another line, which read “vice-ministerial post.” I assumed that he wanted to let people know that he was a government official. But an auditor is more of a manager at the level of a CEO than a government official. The business card does not mean much. But the fact that he wanted to be seen as a government official rather than a manager tells us a lot about the situation of Korea. The recent scandal over an overseas trip by auditors at a public company did not come out of the blue.
The resumes of these “lucky” auditors reveal clues to underlying structural problems. The experience of the auditors was as expected; 16 of them worked for either the Roh Moo-hyun camp during the presidential election, the Blue House, the Uri Party, a pro-government civic organization or a council under the supervision of the president.
Most of the auditors were employed because they had connections with powerful people. It is hard to expect them to be equipped with much expertise. For instance, people who used to work for Roh’s election team have been employed as auditors of the Electronics and Telecommunications Research Institute and the Korea Research Institute of Standards and Science, each of which requires staff to have professional knowledge and experience.
You can’t expect reforms to be implemented by these people. They will not risk anything and only care about keeping their positions. They act only out of self-interest. The recent overseas trip of the auditors was “a promenade of gods.”
The public companies of Korea are a safety zone. State companies dominate the domestic market, and thus there is no competitive pressure. The government regulates and interferes in the name of public interest. Senior executives of public companies cannot decide much on their own.
Moreover, if a public company sees a deficit, the loss is met with taxpayers’ money. In terms of risks, running a public company is the easiest thing you can do. Being employed as an auditor of a public company does not draw as much attention as being a company president. So, the posts of auditors have optimum conditions for hiring people in the networks of influential people.
Last year, an opposition party member carried out research on the yearly salaries of 43 auditors of public agencies who were suspected of being hired because of their networks. For 2005, the average annual salary of those auditors was 130 million won, roughly $140,000. Salaries are payment for having met someone else’s needs, a reward for a certain contribution. If these auditors’ high salaries are not proportional to their output they are guilty of stealing the people’s money.
And one thing leads to another. According to an evaluation of public company management conducted by the Ministry of Planning and Budget, one public company in five has perpetual deficits. The debt of public companies keeps increasing every year, and in 2006, the debt increased 20 trillion won from the year before. At the end of 2006, the debt of public companies totaled 122 trillion won. However, for the auditors of public companies, this desperate issue is just someone else’s problem.
This administration has been hiring people who helped it or who have a good personal connection with the powerful.
One might wonder, “Should politicians be prohibited from working at public companies just because they are politicians?” The administration has said that politicians are better suited to be auditors because of their capacity to manage an entity.
Many people are trying to catch the last train before the president’s term ends. Existing organizations are good at making deals with people who get positions as a reward from the government. These deals usually involve the promise of higher salaries and welfare benefits, making the company unhealthy and passing an extra burden to the people.
A new measure is being designed to fire auditors who do not perform well. But there are limitations on how far reforms can be taken when the management of public companies remains under government control. In order to end the custom of giving influential people high-level positions, public companies must be privatized. They are a dead weight holding back economic growth through corruption and inefficiency.
The economics of public companies can be fundamentally changed if the next administration begins to privatize public companies.

*The writer is the dean of the social sciences college at Myongji University. Translation by the JoongAng Daily staff.

by Cho Dong-keun