Improve director pay disclosure

Registered corporate directors earning more than 500 million won ($472,634) have had their paychecks revealed to the public for the first time in compliance with the revised capital market law. The law was designed to enhance accountability and transparency in corporate management by allowing investors and the public to evaluate whether individual executives deserve the pay they receive based on their past-year performance.

But when the data was disclosed, the interest focused entirely on the astronomical numbers - for instance, SK Group Chairman Chey Tae-won took home 30 billion won last year. Many were surprised by the enormity of the compensation bestowed to executives - regardless of corporate performance - and the gigantic pay gap with general employees. An avalanche of controversy and criticism may lead some companies to adjust the pay scale for their directors. But it is not the proper attitude of a free market society to find fault with individual corporate management styles as well as how companies reward their executives. Antirich and anticorporate sentiment won’t help companies or society in general. The appropriateness of executive compensation should be left to be decided by shareholders and potential investors, not the general public. If investors and shareholders believe their company directors are overpaid, they can exercise their rights and demand correction. The payment disclosure rule helps provide more information to investors and shareholders on how their companies are run and money is spent.

The disclosure rule, however, needs some modification. First, it should not be confined to registered board members who earn more than 500 million won a year. If enhancing transparency in corporate management is the genuine purpose, there is no reason why unregistered directors - specifically members of the owners’ families - are exempt from the disclosure requirement.

Second, companies must also specify how they calculate annual compensation for directors. Shareholders and investors will be able to better assess if executive packages are appropriate when they understand how compensation is formulated.

JoongAng Ilbo, April 3, Page 30