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Restructure public firms

Published: 31 Mar. 2008, 21:29

The results of a preliminary audit on Korea’s public companies released by the Board of Audit and Inspection of Korea is more than absurd. It might be more proper to dub those public companies hotbeds of inequity. While the government has provided national taxes to the companies to do public works amid a guaranteed monopoly, what they have done is bloat their bellies. They took advantage of loose supervision by the regulatory authority. The very firms that earned the moniker “workplaces endowed by God” have instead played the role of public enemy.
The audit showed that Korea Coal Corporation made loans of hundreds of billions of won to a construction company on the verge of collapse by falsifying documents. The Korea Securities Depository manipulated exam scores of some job candidates it intends to hire. The Korea Racing Authority defined overtime work charges as basic fees, thus paying its employees excessively. The Korea National Oil Corporation pretended to conduct restructuring but actually raised the number of its executives.
Given that the aforementioned examples are the outcome of a preliminary audit, it is horrible to imagine what corruption will be revealed later in the full-scale audit. Any time a new administration launches, reforming public companies emerges as a major task to tackle, but no one has heard news that any public company is respectable. According to a 2007 survey by Transparency International, a nongovernmental organization, Korea ranked 43rd of 112 countries in terms of the annual Corruption Perceptions Index. Korea retreated from 40th place in 2005 to 42nd in 2006. Corruption at public companies has been a major problem. How long does the Korean government have to feed those firms with taxpayers’ money?
The most effective way to root out corruption at public firms is to privatize and restructure them. The new government has to push ahead with plans and should not procrastinate behind the excuse of a fluctuating stock market. Firms in industries that can be handled by the private sector should be privatized. Those that can’t, but share common industrial features, should be merged.
The government will also have to strictly mend the audit system. What have the top supervisory institutions done to allow public firms to reach such a deplorable level? Did internal audit departments do nothing about corruption? The level of punishment should be increased and the internal reporting system should be strengthened.