Bonus parties in debtsThe moral hazard issue at public enterprises has resurfaced. Despite multi-billion-dollar losses, executives have been taking home handsome bonuses. According to Rep. Choo Kyung-ho of the Liberty Korea Party (LKP), the combined debt of 35 public corporations increased by more than 9 trillion won ($7.7 billion) while their net profit decreased by more than 3 trillion won last year from a year ago. Still, the companies paid 150 executives more than 7.8 billion won in annual bonuses.
State utility Korea Electric Power Corp. (Kepco) reported on-year increases of more than 5 trillion won in debt and 1 trillion won in deficit last year under the Moon Jae-in administration’s policy to phase out of nuclear reactors and promote renewable energy. In the Ministry of Economy and Finance’s performance review, the public company nevertheless received a B rating, enabling the payout of 327 million won in bonuses to executives. Korea Hydro & Nuclear Power and the National Health Insurance Service — whose balance and income sheets deteriorated sharply under a radical reactor phase-out plan and health care system of the liberal administration — also handsomely paid their management.
But that was possible thanks to the greater weight of social responsibility in management review on public enterprises under the Moon Jae-in government. Of 100 points, general management for business performance accounted for 25 points instead of previous 31, while social responsibility was yanked up to 31 points from 19. Evaluation therefore hinged on how well the management obliged with government policies.
In a normal private company, a sharp deterioration in profits calls for restructuring starting with the management. But those executives congratulated themselves with generous compensations for dutifully following government policies. No wonder public enterprises have become dream workplaces for university students.
Correcting reckless management and honing competitiveness of the public sector have been neglected under the administration. The responsibility for their losses falls on taxpayers in the longer run. The government spent a whopping 2 trillion to support money-losing public institutions last year. The bonus binge adds to public outrage. The practice should be ended.
JoongAng Ilbo, Oct. 22, Page 30