State-run corporations never cease to amaze us. According to a report released by Rep. Kwon Kyung-seok of the ruling Grand National Party, 22 state-run corporations spent 1.75 trillion won last year to pay bonuses to their employees, in crass disregard for their snowballing debts.
These corporations paid 14.5 million won on average to each employee last year, an increase of 46.5 percent from the previous year. It was more than double the 7.1 million won paid in 2005. In contrast, their aggregate debt surged during this period from 82 trillion won in 2004 to 212 trillion won in 2009.
The most outrageous case was Korea Land and Housing Corp., a company in debt over its head. Buried under a debt mountain totaling 125.7 trillion won, the home builder has to pay 10 billion won in interest each day.
Nevertheless, it paid an average of 19.1 million won in bonuses to its 5,600 employees and 40-50 million won to its executives. The payment was based on the annual performance review by the Ministry of Strategy and Finance. The ministry gave it the second highest rating, citing a reason that had little to do with its performance ― the successful merger in 2009 between Korea Land Corp. and Korea National Housing Corp.
Korea Electric Power Corp. paid the highest bonuses last year ― 19.6 billion won per employee on average. The power monopoly incurred a net loss of 77.7 billion won in 2009 and an operating loss of 1.8 trillion won in 2010.
But the Finance Ministry assigned the highest rating to KEPCO in recognition of its role in winning the nuclear power plant project in the United Arab Emirates. Again, the cited reason was not directly related to any improvement in performance.
On Wednesday, GNP Chairman Ahn Sang-soo berated these corporations for lining the pockets of their employees with borrowed money. Ahn said their reckless practice must be stopped, given that it simply increases their debts and put the onus to repay them on taxpayers.
To reform the bonus payment practice, Rep. Kwon has come up with a bill offering new criteria for assessing the performance of government-run companies. They included achievements in cost reduction, profit growth and contribution to the public good to ensure that bonuses are paid in compliance with performance improvement. We hope the GNP brings the bill through the National Assembly.
The Finance Ministry, for its part, needs to reform its review of public corporations based on the new criteria. It should bear in mind that a misguided performance review will lead to poor management decisions, leaving taxpayers on the hook for the resulting losses.