An extravaganza of bonusesIt is not the first time we have been treated to a bonus scandal courtesy of debt-ridden public corporations. The Land and Housing Corp. (LH) is sitting on a whopping 125 trillion won debt, but still felt obliged to hand out generous bonuses of 19.1 million to its employees.
Twenty-two public enterprises extended bonuses worth 1.075 trillion won last year, or an average of 14.5 million won per employee. The amount more than doubled from the average 7.1 million won in 2005.
These companies apparently paid little heed to the fact that their debt surged to 212 trillion won as of 2009 from 82 trillion won in 2004. The audacity of declaring austerity and then engaging in a bonus extravaganza is mind boggling. These companies even claimed that the rewards were part of their annual salary entitlement according to the government performance review.
Of course, we cannot judge public companies’ performance purely based on their balance sheet; if profitability is overly emphasized, public service charges would rise.
Still, performance evaluations of public enterprises have too many loopholes. In theory, the government employs overseers who measure the units’ capabilities and performances.
But members of the evaluation committee are professors with no tested field expertise. In the U.S., public enterprises are audited by the Government Accountability Office, an independent congressional investigative arm, and the Office of Management and Budget, a cabinet-level arm of the White House.
Debt levels of state companies are too often ignored. Debt occupies just 2 of the 100 point assessment system, below labor costs (4 points) and labor relations (3 points). Also, there are many subjective factors in the quantitative appraisal.
As a result, large state companies get higher scores by enlarging the non-measurement grades. That’s why debt-ridden LH and Korea Electric Power were able to reward their employees with hefty bonuses.
State companies have repeatedly been guilty of embarking on reckless government infrastructure projects. They obey the government’s orders regardless of their balance sheets, eying rewards at the end of the year.
The fundamental solution to the state companies’ mounting debt and bonus scandal would be privatization and restructuring. The oversight system should also be revamped. Their debt is eventually picked up taxpayers. We need a more serious approach to the problem.