Role model for reform

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Role model for reform

Hwang Chang-gyu, who built a memory chip-making empire as an engineer and chief executive for Samsung Electronics, the world’s largest chip maker, has been named as the new head of the telecommunications powerhouse KT. Clearly happy investors pushed KT share prices up 1.47 percent after the news. Hwang represents experience and entrepreneurship.

He, however, must prove his management skills in entirely new territory: Samsung Electronics is a manufacturer, and KT is a services provider. KT, formerly Korea Telecom before the fixed-line telecommunications operator was privatized in 2002, has been losing revenue and operating profit. Because of its state-entity origin, the company is greatly oversized with 31,750 employees, more than five times the number of employees of rival SK Telecom and SK Broadband combined. The strife between the employees hired before and after privatization that emerged under the outgoing CEO Lee Suk-chae also will have to be addressed.

A company under direct or indirect government influence had to choose between a government-recommended nominee and someone within as its executive. Hwang, who won among the four candidates in a review by the company’s CEO recommendation committee, is a surprising choice. He is neither a bureaucrat nor someone who worked for the president during the election campaign. The telecommunications company has stopped its revolving-door tradition.

Hwang’s performance could blaze a new path for appointments in public entities and private companies the government formerly owned or in which it currently has a stake in. The best example is Kazuo Inamori, former head of a leading telecommunications service provider and a high-tech guru, who became head of Japan Airlines when the carrier was teetering on the brink of bankruptcy. Despite having no airline industry experience, the veteran entrepreneur returned the Japanese carrier to profitability in just three years. He closed money-losing subsidiaries and routes, and dismissed more than 10,000 employees despite union protests. Through persuasive and unwavering leadership, he also cut retirement benefits by 30 percent.

Such gruelling restructuring and a revenue base are essential to rebuilding KT. It must reinvent itself through changes within by prevailing over inside and outside pressure and resistance. Hwang, whose appointment must be approved by shareholders at a meeting next month, said he will work toward recreating KT as an innovator and a leader in ICT business. We hope the so-called Hwang rule - for his contribution to the memory chip revolution - shines in the telecommunications service sector as well. His success could serve as an example to other state-invested companies in need of reform.
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