ED Public firms need overhaul

New administration should stop 'parachute appointments'

President Yoon Suk-yeol called for strong measures Tuesday to reform public companies and state-run agencies struggling with low profitability and bloated debt. In a Cabinet meeting, Yoon said, “Public-sector reform is a task that cannot be delayed any further,” noting that the combined debt of public institutions here soared to 583 trillion won ($452 billion) at the end of 2021.

Yoon's call for reform came on the heels of the Ministry of Economy and Finance's announcement Monday of its annual management evaluation of 130 public firms and agencies. According to the announcement, 18 out of the 130 entities received poor assessments. In contrast, 72 firms, or more than half of them, received excellent or good assessments, which would make them eligible for performance-based bonuses. What's even more incomprehensible is that 40 companies that received average assessments are also eligible for bonuses.

The awarding of bonuses even to underperforming public firms was possible because the previous presidential administration changed the rules to give more weight to social value contribution factors such as job creation in its assessment of public firms' performances. Instead, the weight of profit-making factors was lowered, prompting them to faithfully carry out unrealistic and ideologically oriented government policies. The consequence is that many of them grew bigger but became less profitable.

The finance ministry said it will undo the flawed assessment system to nurse those poorly managed public firms back to health. But bolder measures are necessary, given the severity of lax management at state-run businesses. Over the last five years, 18 public firms have been established for no apparent reason and the size of the workforce at the 350 public institutions has increased by 30 percent.

What's certain is that public corporations must be revitalized. The past government worsened their management solely to serve its political purpose. The new administration should stop the evil practice of “parachuting” unqualified politicians or bureaucrats to the top or executive posts of public enterprises. It must put top priority on making them more profitable.