Privatization of state firms
KT&G highlights importance of corporate governance reform By Lee Ho-young Several large government-owned firms have been privatized to improve their operating efficiency and financial health. As government-owned firms are established and operated with taxpayers’ money, they are expected to be managed with the utmost efficiency to provide public services to improve the national welfare. The taxpayers’ concern with management’s moral hazard and information asymmetry leads to further expansion of privatization. Woori Bank and Incheon International Airport Corp. are recent examples of companies that are considered candidates for privatization. By examining the KT&G case in mid-2000, it helps interested parties better understand what could happen after privatization. The KT&G case also emphasizes the importance of corporate governance to ensure a successful privatization. KT&G originated from a government division, known as Jeonmae-Cheong, which literally means a monopolized government organization for dealing in tobacco sales in 1952. It changed its business structure to
