Many public institutions and state enterprises raised the salaries of their executives and employees last year despite snowballing debt. According to data submitted by the Ministry of Trade, Industry and Energy to Rep. Kwon Myung-ho of the main opposition People Power Party (PPP), the combined debt of 39 public companies under the ministry has increased by about 16.6 trillion won ($14.1 billion) over the past two years, from 181.7 trillion won in 2018 to 198.3 trillion won in 2020.
During that period, the average annual salary of their executives rose from 156 million won to 172 million won. The yearly wages of employees also climbed from 76.4 million won to 78.3 million won on average. These state-invested companies showered their employees with bonuses, even though they were up to their necks in debt. Some public enterprises even provided merit payments despite receiving poor grades in management evaluations. For instance, Korea Coal Corp. got a D grade in its performance assessment, but raised the average annual salary of its executives from 112 million won to 133 million won.
That and many other similar cases show how these state-run firms have lapsed into moral hazard. Under the pretext of pursuing public good, profitability has long become a secondary goal for them. If public corporations suffer a deficit, they receive financial help from the government. The state enterprises are supposed to tighten their belts as they are run on taxpayer's money. However, they have done exactly the opposite, not least because they are mired in sloppy management.
Nepotistic appointments of top officials by successive governments have exacerbated the situation. According to an analysis by Rep. Seo Il-jun of the PPP, out of 728 executives appointed to state enterprises this year, 99, or 13.8 percent, were affiliated with the ruling Democratic Party of Korea (DPK). Many of them secured posts at these companies despite their lack of relevant expertise, only because they were cronies of the governing party or the ruling elite. Labor and management are united at these firms in garnering high salaries without trying too hard to improve their performance. There seem to be many justified reason reasons why people are criticizing such state-run enterprises as “tax thieves.”