Being fired unwittingly
In a land of one-eyed people, those with two would be considered strange.
Last week, former SK Networks CEO Moon Duk-kyu’s letter of protest received similar responses. In a letter to those with appointing power, he wrote: “The practice of firing a CEO without providing any reason or explanation must stop. This ambiguous human resources decision hurt my pride after 40 years in the business.”
Moon was fired at the end of last year after serving for 22 months.
In fact, his every word is reasonable, and his feelings are understandable. Leadership is the prerequisite for the alchemy of management. So from where does leadership in a person who is CEO but not the corporate owner come? It comes from the support and trust afforded by the owner. But how can support and trust be verified? No one knows when the owner might change his mind.
Verbal promises or written contracts may be too formal and the effect is doubtful. So a guaranteed term was established. According to commercial law, the term for a registered executive is three years.
However, a three-year term is hardly ever granted. CEOs of listed companies in Korea serve an average of 31 months, far less than the 6.4 years in the United States and 4.6 years in Japan. Two of the three CEOs at the nation’s top 30 companies serve less than three years. That’s why Moon’s protest over “not completing the term and being fired for no reason” sounds a bit strange. The position of a CEO in Korea is considered one that can change at any moment.
Let’s just say it could be possible in the private sector. How about the government? If the CEOs are the ministers, the president is the owner. But government appointments are even more unstable than in the private sector.
On Feb. 17, a new chairman-designate for the Financial Services Commission (FSC) was announced. How would incumbent Chairman Shin Je-yoon feel about being fired so suddenly? Has he heard from those with appointing power why he was being replaced? Although I did not ask him, I have reasonable guesses.
According to those around him, he seemed happy after having a one-on-one meeting with the president just before the announcement. His juniors even told him that he could complete the three-year term without issue.
However, he was suddenly replaced, and a source close to him said that even the chairman himself did not know it was coming. He even asked me if I knew anything about it. All I could tell him was, “A minister in Korea seems to be in a position where he can be sent home when the president changes her mind.”
Shin Je-yoon is not the only one. Past chairmen were not much different. The Financial Supervisory Commission, the predecessor of the Financial Services Commission, was created in 1997 when the country was hit hard with the foreign currency crisis. The financial crisis was caused by the government pressuring banks to give easy loans to insolvent companies, so a financial authority free from power was created. That’s why the chairman’s three-year tenure was guaranteed in a separate law.
However, founding Chairman Lee Hun-jai did not complete his term. Second Chairman Lee Yong-keun was replaced after seven months. It became increasingly natural that a chairman not complete his term.
A guaranteed term is a source of leadership power for ministers and CEOs. The market wouldn’t listen to a financial policy chief who was always being replaced. President Park Geun-hye and Deputy Prime Minister for the Economy Choi Kyung-hwan ask for “financial reform” whenever they have a chance. They have also rebuked that self-protection prevails in finance.
However, they have the cause and effect wrong. Self-protective mechanisms kick in when one feels threatened. Before the president and the finance minister criticize financial authorities and call for reform, they should guarantee the term for the chairman of the FSC. Reform cannot be carried out when the leadership of the one in charge is shaken.
At the time of the financial crisis, the Wall Street Journal pointed out that Korea’s economic crisis was caused by an absence of leadership.
How about now? Has it improved at all? Will the new financial czar be guaranteed this three-year term?
If this is a bet, I bet no. How about professional gamblers who bet on probability? They would bet 10 to 1 - 10 on no and 1 on yes. There have been 10 chairmen before Lim Jong-ryong, and only one of them - Yoon Jeung-hyun - has completed his full term.
JoongAng Ilbo, March 26, Page 30
The author is an editorial writer for the JoongAng Ilbo.
by Yi Jung-jae