CEO paychecks may be subject to mandatory disclosure

By Kang Seung-woo

The nation’s financial regulator said Thursday that it plans to make it mandatory to reveal what all executives at listed and financial holding firms earn in a move to offer a transparent look at high-profile executives’ salaries.

Currently, listed companies have only to show the total paid to executives, not the individual amounts given to each one.

“Like the United States and Japan, we are reviewing a move to force listed companies and financial holding firms to disclose the paychecks of each executive instead of the total amount,” said an official of the Financial Services Commission (FSC).

Another official said that the issue is under review at a working level, but nothing has been decided yet.

The financial authorities’ action comes as the official data cannot expose the salaries of the highest-ranking executives at the country’s major conglomerates and financial services companies who have a strong grip on management, just showing the overall total.

In political circles, lawmakers are pushing for full executive compensation disclosure.

“After the recent global financial turmoil, we intend to aggressively push for the individual disclosure of corporate executives’ salaries,” Lee Jung-hee, chairwoman of the opposition Democratic Labor Party, was quoted as saying by Yonhap News Agency.

A capital market law revision that included such a plan was tabled in March 2009, but has not been thoroughly deliberated, Lee said.

In advanced economies like the United States and Japan, the system to disclose individual executive salaries has long been in operation.

The U.S. Securities and Exchange Commission (SEC) requires financial companies to disclose compensation, base salaries, bonuses and options of their chief executive officer (CEO), chief financial officer (CFO) and the three highest-paid employees.

In Japan, executives whose annual salaries are over 100 million yen have to reveal their basic pay, stock options and retirement compensation from last year.

Market watchers said that the executive paycheck revelation will contribute to improving corporate governance structure and providing accurate information for investors.

“Following the global financial crisis, regulations to open executive compensation to public scrutiny have been tightened across the world. Korean firms also need to reveal executives’ respective salaries,” said a Seoul-based economist.

Another analyst said that owners at the nation’s conglomerates have strong control of the CEOs of their affiliates, so CEOs are not independent and boards of directors fail to function properly. Thus, it is required to disclose their salaries for greater transparency to help keep the board on track and owners’ intervention in check.

However, the Korea Listed Companies Association said information on executive compensation should not be disclosed to individual investors since it is a private matter for management and shareholders.