Parachutes smother reform

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Parachutes smother reform

The financial industry has once again been shaken by allegations of so-called parachute appointments. According to reports, the heads of Daewoo Securities and Woori Investment Securities, two state financial companies, and the Korea Banking Institute have parachuted in.

The person nominated for the top Daewoo job worked for President Lee Myung-bak during his campaign; the nominee for the Woori chief executive position comes from a certain region and graduated from a certain university; and the Korea Banking Institute chief was on Lee’s transition team.

So unless you worked on the presidential campaign or have regional or school connections, you shouldn’t bother applying for executive positions at state financial companies.

This is not to say that parachute appointments are always bad. To overhaul carelessly managed state-run companies, it may be necessary to recruit competent individuals from outside. And those who are on the same page as the government can carry out the presidential campaign pledge of reforming state-run firms.

But it’s difficult to find an appropriate middle ground between bringing in an outsider and appointing someone from within. Having said that, we think this administration has gone too far.

Incompetent or unqualified appointees have been named to key posts simply because they contributed to Lee’s election victory. These individuals are taking up auditors’ positions at essentially all state-run companies. It’s disconcerting to hear that in some cases, capable individuals have been pushed aside.

At this rate, labor union reform at state-run firms will get nowhere. The unions know that a parachuted CEO lacks a firm foundation and can put pressure on him to agree to their demands.

In fact, it’s no slight exaggeration to say the labor unions have been able to build their own “kingdoms” thanks to parachute appointments. More often than not, these top executives have reached compromises with unions to protect themselves, which makes the reform process all the more challenging.

With this mind, it’s fair to say that progress and the practice of parachute appointments can not go hand in hand. If you want to hire someone from outside, campaign experience and school or regional ties should not count. Otherwise, no matter how much the government extols the virtues of competence and expertise, people will always think “parachute” when they meet with the company head.

The best way to reform state-run firms would be to privatize them, a more certain way of ridding Korea of parachute appointments and “the kingdom of unions.”
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