Bad bonuses in GyeonggiDespite poor operational performance, mounting corporate debt and chronic deficits, corporate managers can still somehow pocket fat perks. The chief executives of 23 public enterprises in Gyeonggi Province last year received remuneration packages exceeding 150 percent to 360 percent of their annual salary. The payouts, of course, came from taxpayers in the region.
Gyeonggi Urban Innovation Corp., which is facing a debt of 7.53 trillion won, handed out a record high 3.2 billion won worth of payouts to executives last year.
The company’s debt has increased by 1 trillion won a year since 2008, even though its short-term liabilities have reached 1.8 trillion won. But as soon as the company raked up a small net profit, it used it to pay executives instead of tending to its balance sheet.
Gyeonggi English Village and the Korea Credit Guarantee Foundation, which incurred deficits of 4.6 billion won and 6.8 billion won, respectively, also had the audacity to pay fat bonuses to executives.
The companies explain that they were only following the remuneration guidelines in Gyeonggi Province’s performance review policy. Executives are ranked in four grades and they can receive payouts of at least 150 percent if they rank better than the lowest grade.
No CEOs at public enterprises last year received the lowest D grade. They were more or less guaranteed to receive bonuses regardless of their performance. We can naturally suspect some kind of shady deal between the companies and their executives and the provincial or municipal governments and their officials.
We hardly doubt such abnormalities are limited to Gyeonggi Province. Public corporations in other areas will likely be more or less the same.
Local governments are in a poor financial state. Their tax revenue can only cover just half of their expenditures, which means they must run their local affairs on central government funds. A local government’s bond issuance, used to fund their business projects, is 25 trillion won. The liabilities held by 387 public enterprises nationwide exceed 50 trillion won. The local governments are all in debt and that will return to haunt residents in the form of taxes.
Public corporations will likely go on paying bonuses to their executives. This cannot continue. Gyeonggi Province should either run state companies properly or revise the regulations to strictly limit bonus payments to profit-making enterprises.