New salary guidelines imposedNine state-run financial institutions will have to adopt stricter guidelines regarding performance-based evaluations and salaries, the Financial Services Commission (FSC) announced on Monday.
The FSC has established “stringent” performance-based guidelines for the institutions that have been criticized for being complacent and lax despite their high salaries.
The nine public financial institutions are the Korea Development Bank, Industrial Bank of Korea (IBK), Korea Deposit Insurance Corporation, Korea Credit Guarantee Fund, Korea Technology Finance Corporation, Korea Housing Finance Corporation, Export-Import Bank of Korea, Korea Securities Depositary and Korea Asset Management Corporation.
They will have to accept a guideline that recommends 30 percent incentives for annual salaries, the largest percentage proposed by the Public Institution Operation Committee last week.
All employees and executives from level one through four at the financial institutions will be subject to a new performance-based salary system, where incentives account for up to 30 percent of their annual salaries from next year. This year, incentives account for 20 percent of annual wages.
Within a level, the best performing employee will get a 20 to 30 percent higher wage annually than the worst performing employee, the FSC said.
The regulator came up with the enhanced principles as it found that the institutions were maintaining an outdated seniority-based salary system which lacked reasonable evaluation.
According to the FSC, the IBK, Korea Credit Guarantee Fund, Korea Technology Finance Corporation and Korea Housing Finance Corporation currently pay executives incentives that account for just 10 percent of their total salaries, a fairly low level.
“There has been criticism that the financial industry has falling productivity while still paying well due to complacency and resistance to change,” the regulator said. “There is a need for a new education and evaluation system that pays hard workers more in order to root in a culture of innovation and creativity.”
According to the data by the FSC, the average annual salary of an employee at public financial institutions was 85.25 million won ($70,815) in 2014. The average for non-financial institutions was 59.66 million won.
“We expect the performance-based salary system to expand from the public sector to the private sector of the financial industry,” said Sohn Byung-doo, director general of financial policy at the FSC.
The official emphasized the aim of the system is not to cut wages. “We seek to tackle the free-riding problems running deep across the industry.”
BY SONG SU-HYUN [email@example.com]
More in Economy
Help after the rains
The Gangnam-Gangbuk price gap remains
Government to create 15 smart green industrial complexes
HSBC and BCG issue warning about trade protectionism