Good grades for failing
The author is an editorial writer of the JoongAng Ilbo.
I wondered how this could happen after reading the government’s recent evaluation on the management of public corporations. The government complimented the performance of a public company even when it recorded a deficit in hundreds of millions of dollars after making good profit for a long time.
I am talking about the Korea Electric Power Corporation (Kepco). The public entity made 4.9532 trillion won ($4.2 billion) in operating profit in 2017 and received a B grade for good management in the 2018 management evaluation by the government. Everyone agreed. But in 2018, Kepco reported 208 billion won in deficit, a sudden fall in just a year. For a private company, or a public company, that’s a disaster. But Kepco actually received words of encouragement from the government.
The reason is more dramatic. The government said Kepco helped its social value policy. “Despite its poor performance last year, Kepco made efforts to create enough jobs to offset the shortcoming.” The core business of Kepco is electricity supply, transmission, distribution and future growth projects. From the management performance perspective, the core businesses are nearly ruined. But that’s not how the current administration views it. I think that Kepco’s core businesses were replaced by hiring more people.
Thanks to the good management evaluation, Kepco employees will receive a bonus. It is absurd that a company with deficit distributes bonuses. How can we expect it to do its job properly under such circumstances? When the main business of a public corporation changes according to the interests of the government, what better management strategy is there than mooching off the government? As long as public companies behave and follow government policy, it will bring them bonuses. When insiders say that too many people are hired and there is not enough work, it is against the management, who follows the order from the government. So it is not strange that board members even opposed lowering prices after calling for price hikes? They would say, “Oh, that’s what the government wants.”
Kepco is a listed company, and it should make profit. Then, you should find out the cause for its losses. When the essence of “management” changes according to the administration, it is not surprising that the private sector say they don’t trust the government, according to a survey of Korean businessmen by Switzerland’s IMD Business School.
The government’s attitude toward the private sector is no different. On June 19, President Moon Jae-in declared a “manufacturing renaissance” for Korea. The Korea Employers Federation (KEF) said that the government asked for positive comments for the ceremony. In fact, the KEF had remained overly quiet on the violent incidents at Hyundai Heavy Industries, a member of the business lobby group. If economic groups, including the KEF, made the comments at the request of the government, how is it different from mobilizing supportive statements? I cannot believe that such a request came from the current administration, which pursues ratification of the International Labor Organization’s convention on forced labor elimination.
President Moon is said to have complimented U.S. President Donald Trump for the booming economy since he came into office. As a citizen barely enduring the falling Korean economy, I am frustrated. Rather than complimenting the attitude of a foreign head of state toward the economy, why can’t we repent as our economy fell only in two years?
An old economist said that the owner risk can be removed simply by giving up stubbornness.
JoongAng Ilbo, July 1, Page 27