An ailing appointment systemGovernment-owned financial institutions are on alert as the new Park Geun-hye administration plans to change their CEOs. Shin Je-yoon, the nominee to head the Financial Services Commission, started singing the tune, and then Choi Su-hyun, head of the Financial Supervisory Service, joined the chorus. At his confirmation hearing on Monday, Shin said he would recommend replacements if necessary even though terms have not expired. Choi attacked the CEO of KB Financial Group for an information leak. Calling it a “terrible incident that shakes the foundation of the market,” he vowed to hold the CEO accountable. The intensity of their remarks signals a massive reshuffle of heads of state-owned financial organizations.
There is controversy over whether the government should really change the CEOs of public entities with every power shift. But if the new administration is determined to do so, it must do so correctly.
The first step is fixing the current “open recruitment system.” In theory, it’s an idealistic system, as a special committee must recommend three to five candidates for the top position before the government appoints one of them. But the system has often been abused. The Lee Myung-bak administration came under fire for using it for “parachute appointments.” The government not only put pressure on committee members but tried to conduct another round of open recruitment when its preferred candidates were eliminated from the competition.
The Lee administration put their favorite people in the posts of CEO, auditor and outside member of the board at government-run financial institutions. It sought to plant favorites in executive positions of public and private companies. The new government must put such malpractice to an end.
The Korea Institute of Public Finance’s latest report gives a clue. It proposed a full-fledged revamp of the way public corporations run the open recruitment system. The report also advised that the recommendation committee prohibit government officials from attending its meetings or record discussions at the meeting, and clearly state the reasons for any additional recruitment. The report also recommended public companies select auditors with expertise in finance and accounting. The suggestions correspond with the new government’s personnel philosophy based on a strict ban on parachute appointments.