New moves laid out to rein in public companies

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New moves laid out to rein in public companies

The government laid out a series of rewards and penalties on Saturday as part of efforts to enhance the efficiency of Korea’s public sector, launching?an evaluation committee responsible for reviewing efforts this year by public institutions to reduce debt and normalize their management.

Hyun Oh-seok, the finance minister and deputy prime minister, said the government will offer incentives to the 10 companies with the best debt-reduction performances, which include extra financial bonuses depending on the annual amount.

Hyun added that the government will also have company CEOs take the lead in distributing those incentives to their employees and executives in a bid to hold them more accountable.

An interim evaluation is slated for September, in which institution heads and actual debt-reduction progress will be assessed.

CEOs will be rated on their efforts as well as their performances. Those performing poorly may face dismissal in the worst-case scenario, as well as restrictions on bonuses and wage increases. Incentive restrictions and wage freezes will also apply to employees.

Hyun said it is the first time that the government has ever imposed wage penalties on employees in public enterprises.

He also requested the unions take an active part in the normalization plan by “overcoming collectivism and a cliquish attitude.”

In addition to the standard annual management assessment of last year’s performance, scheduled for the end of June, the committee will start evaluating the companies’ debt reduction plans in September and announce the results on Oct. 10, which the government has designated State-Run Corporation Normalization Day.

The committee is headed by Yeom Jae-ho, the vice president of Korea University, and has 158 members.

“I hope this year’s management assessment will be the driving force behind state-run institution reform, rather than a simple and repetitive annual event,” Hyun said.

The finance minister also unveiled parts of his plan for next year’s management assessment.

As normalization efforts accelerate in 2015, future assessment will primarily focus on how far the companies have come in their pledged reduction goals as well as labor and management’s cooperation in reaching those goals.

Companies that show significant progress in reducing employee benefits will be granted additional points.

State-run institutions in Korea are notorious for doling out extravagant welfare benefits, high salaries and workplace complacency.

With the government stepping up its reforms, the Korea Gas Corporation (Kogas) unveiled yesterday its debt-reduction plan to clear its debts, worth 10.5 trillion won ($9.9 billion). By 2017, it aims to have?a debt level of 249 percent, compared to 385 percent in 2012.

That followed an announcement last week by the Korea Electric Power Corporation (Kepco), the country’s electricity monopoly, that it will cut its debt by 14.7 trillion won by 2017, the company’s largest-ever debt reduction scheme.


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