Directors should prove abilitiesThe annual salary of the country’s best player and most beloved slugger Lee Dae-ho was the subject of heated debate among baseball fans in early 2011. The player and his fans argued that the Lotte Giants failed to pay due respect to the all-time reigning MVP, who finished the previous season by winning seven out of eight categories in batting skills and setting the world record in consecutive home runs, putting his team at the top rank. Arbitration broke down and the Korea Baseball Organization sided with the team, while fans and media sympathized with Lee.
One of the league’s highest-paid players, Park Myung-hwan, a LG Twins pitcher, had his annual paycheck of 500 million won (455,000) drastically scaled down to 50 million won during the same year, but the decision did not stir any controversy since it reflected Park’s poor performance.
In September of the same year, American citizens camped in the streets of various cities in the Occupy Wall Street movement, protesting the greed of executives of financial institutions that led to the global-scale financial meltdown starting in 2008. Stanley O’Neal, the former chairman blamed for pushing Merrill Lynch into subprime lending and its subsequent collapse, picked up a retirement package amounting to $160 million. Bank of America CEO Ken Lewis also collected a $72 million compensation package upon leaving the company during the financial tumult that spread around the world.
The National Policy Committee of the National Assembly passed a revised law including mandatory disclosure of annual compensation of registered corporate directors who earn more than a cap recommended by presidential decree of 500 million won a year.
The corporate sector opposed the move saying it was excessive state interference in the private sector. The critics also argue that corporate directors should be compensated for their performance in order to keep up entrepreneurship and competitiveness. Disclosure can lead to comparison in earnings among companies as well as against ordinary employees to fuel unnecessary controversy and resentment. As the head of the subcommittee that parses the details and reviews the bill, I would like to point out that the essence of the revision is making public the rationale and guidelines for corporate compensation for directors, not the actual size of their pay.
Corporate directors should receive compensation according to their performance. Shareholders and investors have the right to know how much they earn and why.
They must earn according to their contribution to the company instead of their degree of loyalty to the group owners. The United States, the U.K. and Japan have been disclosing directors’ salaries. Although there are slight difference in the procedures and means, our revision aims for the same goal.
As we have seen with baseball players, the Korean public won’t merely evaluate a corporate director upon learning the amount of his or her paycheck. Regardless of the number, if he or she is deemed worthy, few would argue against it. What’s more important than the size of the paycheck is whether the highly paid director is worth the reward.
All policies carry upsides and downsides. The disclosure of directors’ pay is in a trial stage. It is immature to blindly oppose a bill that has not even been tried. The measure could allow corporate directors to better demonstrate their abilities. That ability to be rewarded fairly would be a lesson and inspiration to young people who are entering corporate society.
Translation by Korea JoongAng Daily.
*The author is a lawmaker of Saenuri Party.
By Park Min-shik