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[Opinion] Corporate Governance

Posted December. 22, 2005 03:02,   


Are we seeing signs of change in the “Republic of Committees?”

The Ministry of Government Administration and Home Affairs has come up with a new measure to bring changes to its structure, in the face of criticism that the excessive number of government committees causes conflicts and considerable costs.

The measure is centered on eliminating and integrating 40 committees whose functions are overlapping or unnecessary among a total of 381 committees.

Of course, things will not improve overnight. The procedure to amend the concerned laws should be undertaken next year. Tax payers’ money has been supporting this inefficient government structure.

The situation is even worse with public companies compared to the government. Public companies managed to survive the waves of restructuring that threatened private companies in the wake of the Asian financial crisis. They are still safe; protected from privatization by the Roh administration. They are festering with rampant corruptions ranging from mismanagement, window dressing, and collusion between management and labor to practices that give favors to retirees. However, the government hasn’t gone far enough to improve the corporate governance of public companies. It only promised to strengthen the supervision over public companies. Neither privatization nor autonomy was promised. This wasteful structure of public companies only increases the burden imposed on Koreans.

If private companies followed in the footsteps of public companies, they would have gone under belly already. “Efficiency” is the mantra in the private sector. Korean private companies, which were forced to embrace the corporate governance in compliance with global standards in the wake of the financial crisis, have earned recognition from foreign investors for their respectable transparency. In many large conglomerates, outside directors, which were a new idea for the nation eight years ago, fill 60 to 70 percent of the seats in the boardroom. Corporate governance and the management strategies employed by some leading Korean companies including Samsung are now studied by international business schools. This stands in sharp contrast with the nation’s political arena; the administration and the ruling party are dominated by people who share mental ties, in other words, similar backgrounds, values and world views.

Kang Chul-kyu, the chairman of the Fair Trade Commission, pledged yesterday that efforts will be made to encourage large domestic conglomerates to shift towards the holding company system, a prevalent system in many advanced countries. He, of course, added, “There is no change in our position that the decision for ownership structure and control should be left to each company.” The first part should never have been said. How far can an inefficient government go to intervene in the management of successful global companies, on the pretext of the national economy? Jang Ha-jun, a professor of Cambridge University in the U.K., criticized the government last week by saying, “GM, an American automobile giant boasting ideal ownership structure and corporate governance, delivered the worst performance. There is no such thing as ‘ideal’ corporate governance envisioned by the government.”

Hong Kwon-hee, Editorial Writer, konihong@donga.com