Heads of Public Services Firms Face Salary Cut
By Lee Hyo-sik
Staff Reporter
Korea Development Bank (KDB) governor and other well-paid heads of state-run companies will face a salary cut and could be dismissed if they fail to live up to management goals, even before their term expires.
These are part of government efforts to restructure public firms into a more efficient and profit-oriented entity. The government is also considering privatizing as many as 70 out of 305 state-run companies, while consolidating up to 30 organizations.
The Ministry of Strategy and Finance said Tuesday that in an effort to lower wages for public company CEOs, the base annual salary for all incoming heads of state-run firms will be set at 108 million won.
The ministry said most public firms' CEOs will not see drastic changes in their salaries as the average annual paycheck stood at 105 million won last year, a little higher than vice minister-level officials' 101 million won. The performance-based bonus will range from 100 to 200 percent of the base salary.
However, KDB governor and presidents of Industrial Bank of Korea (IBK) and Export-Import Bank of Korea (Eximbank) will likely see their base wage halved.
The ministry said the heads of the three state-run banks will receive about 160 million won in base annual salary, 1.5 times that of vice ministers. Currently, the average base annual payment for the three public bank CEOs is about 325 million won.
Even though they are entitled to the additional 200 percent bonus, which could increase the total payment to 480 million won, the amount is still lower than last year's. In 2007, the KDB governor received 612 million won in salary and other benefits, followed by Eximbank president with 568 million won and IBK president with 558 million won.
The ministry also said heads of public firms will be required to submit management plans every year and sign a contract with supervising government bodies. In accordance with the management schemes, company CEOs will be evaluated yearly and those who fail to deliver promises will be dismissed even before completing their tenures.
Vice Finance Minister Bae Kook-hwan said not only poor-performing public firm CEOs, but also ministers and vice ministers of supervising ministries will be rated unfavorably in evaluation.
The government also plans to introduce an open recruiting system for the heads of National Pension Service, Woori Bank, IBK and 87 other state-run companies to encourage more private experts to apply.
The ministry said an independent personnel recommendation committee, consisting of mostly private professionals, will be set up for a fairer evaluation and applicants will be required to submit only a self-introduction letter and a management plan.
The ministry also plans to privatize up to 70 public firms and consolidate some 30 entities through a series of mergers.
Vice Minister Bae said the government has not yet decided when and how it will turn state companies into privately-run ones. But he said the government could announce the privatization scheme as early as next month.
The Lee Myung-bak administration has unveiled a series of measures over the past two months, aimed at reorganizing public firms into more efficient and profit-oriented organizations. It said it will privatize the KDB's investment banking unit and sell its shares to strategic investors to raise funds to assist small- and medium-sized enterprises.
Last week, the government dismissed chief executives of 10 state-invested financial firms out of 14 under the supervision of the Financial Services Commission (FSC) and the finance ministry. To-be-replaced CEOs are mostly former senior government officials.
FSC Chairman Jun Kwang-woo said the new CEOs will come from among those who have proven managerial acumen in private companies, not among high-ranking civil servants.
To date, retired ministers, vice ministers, assistant ministers and directors of the finance ministry headed the state-run financial companies.