Small companies struggle to find CEOs due to toughened penalty on accidents

By Lee Kyung-min

An increasing number of small and medium-sized builders are struggling to find CEOs due to a strengthened law on industrial accidents that has scared off potential managerial candidates, according to analysts Thursday.

Under the new industrial accident law which went into effect Jan. 27, the heads of companies could face a minimum of one year in prison for fatal industrial accidents involving a death at a workplace found to have failed to take necessary safety measures.

Few people are willing to risk a prison term following intense public scrutiny of the construction, manufacturing and shipbuilding industries, since they feel the law lacks clarity in defining preventive measures, while clearly outlining only penalties.

Analysts point out that there is little causal relationship between harsh punishment and accident prevention, causing more firms to have a tough time finding top decision-makers, while corporate management activities are undermined in the process.

Amplifying the collective reluctance are the deaths of three construction workers in a landslide at a quarry owned by construction material maker Sampyo in Yangju, Gyeonggi Province, Jan. 29, only two days after the new law took effect. Industry watchers say the level of punishment concerning the first case subject to the new law will largely set the tone going forward.

Grinding to halt

Hanyang, a mid-sized construction firm based in Seoul, has ordered key managerial officials and on-site workers to take leaves throughout the first week of this month following the Lunar New Year holiday which ended Wednesday.

The move is aimed at eliminating any chance of fatal accidents from occurring. But experts said the focus should be on bolstering preventive measures instead of strengthening punishment.

“Things happen, no matter how much workers try to stay alert,” Seoul National University economist Lee In-ho said.

“Who would want to be CEO with the fear of going to prison for at least one full year hanging over their heads? It is no wonder industries find it difficult to appoint CEOs. This will continue, unless the law clarifies mitigating circumstances for immunity to some degree,” he said.

No one will be enthusiastic about taking on top jobs at manufacturing companies due to the harsh penalty, said Lee Eun-hyung, a researcher at the Korea Research Institute for Construction Policy (RICON).

“Not everyone would go as far as to quit as CEO before accidents occur, but everyone is dreading that scenario. Builders among other accident-prone industries are expected to undergo a shortage of top officials for the time being,” Lee said.

This view was reflected a recent survey conducted by the Korea Federation of SMEs (KBIZ) of 322 firms, more than half of which, or 53.7 percent, said it was impossible to comply with the new law.

The survey showed 40.2 percent of respondents saying they are having a tough time understanding the legal obligations, while 35 percent said they face a lack of dedicated workers amid budgetary constraints.

According to the Ministry of Employment and Labor, major industrial accidents including the deaths of workers occurred at a total of 671 firms in 2020. Among them, 80.3 percent, or 539 were small businesses with less than 50 employees.