[Column] Raising accounting transparency for unions

Hong Ki-yong

The author is a professor of business administration at Incheon National University and president of the Korean Taxpayers Union.

Controversy is raging over the 150 billion won ($115.6 million) our labor unions received from the Moon Jae-in administration over the past five years. The Yoon Suk Yeol administration is closely checking if large-scale unions have been keeping their accounting book as required. The conservative government also plans to augment its oversight on their accounting and mandate more labor unions to make public their accounting records. The government is convinced that transparent accounting practice helps promote workers’ rights. A survey shows that 84.5 percent of people in their 20s and 30s want labor unions to raise their accounting transparency, as the issue is directly related to promoting workers’ rights and interests.

Accounting is an effective tool for stakeholders in any organization to make a rational decision. Therefore, information on accounting should be provided to them in a trustworthy and timely manner. As transparent accounting is the very foundation for fair operation of any businesses, most organizations are required to provide accounting records to their members — in some cases, to the general public, too — by law.

Nonprofit organizations — including charitable foundations, scholarship foundations and academic societies — must offer their accounting information to relevant authorities. Even central and local governments should make public their accounting data. For-profit companies must disclose their accounting information electronically or in daily newspapers, and if they are listed companies on the Kospi or Kosdaq, they must separately place that information on the Data Analysis, Retrieval and Transfer System (DART) system operated by the Financial Supervisory Service (FSS). If a company has capital over 50 billion won, it is obligated to get an outside audit by public accountants.

Nonprofit organizations are no exception. They must submit their accounting information to related offices. If a public corporation have assets worth more than 500 million won, they must go through an audit on their accounting from a CPA. Accounting information on nonprofit bodies is disclosed online on a particular segment in the homepage of the National Tax Service.

Labor unions are exempted from property tax given their activities for the public interest, and yet they are critically lacking in transparency of their accounting. Unions are required to keep their accounting data for three years, but the data is available only at the request of unionized members. No laws allow the public access to the information.

As unions can submit accounting information to the government only when they want, they needn’t report it. They certainly have accountants, but can appoint insiders as their accountants. Audit results of their accounting also can be accessed by unionized members only.

In the U.S., labor unions must report their accounting information to their members and the government annually. The government also must allow public access to the information so that it can be used for statistics. In Japan, labor unions are required to submit their accounting information and audit results to union members, and in the UK, unions must present the information to the government. Despite a few differences in systems, labor union accounting transparency has been legislated in advanced countries in a way that stresses the public interest regarding accounting information and audit results while not infringing on union autonomy.

As labor unions seek to protect the rights of a multitude of workers, they are also required to take social responsibility for the general public. Therefore, large unions must allow the public to access their accounting information each year and regularly report it to the government so that decision-makers can use that information to draw up labor policy in the government.

Our labor unions must designate outside experts like CPAs as their accounting watchdogs to escalate the level of independence and expertise, not to mention making the results of their audit public. Unions are eligible for government subsidies just like other public corporations, but the government must stop unnecessary support for them, such as financial help for rented facilities.

Labor unions cannot receive special treatment just because they raise political voices. They can promote the rights of workers only when they are trusted by their members and the public. The enormous interest those in their 20s and 30s show toward their transparent accounting signifies a positive change for a better future of the country. Unions must recognize that their heightened accounting transparency only helps promote their rights and interests further and eventually consolidate public trust in them.

Translation by the Korea JoongAng Daily staff.