State-Owned Firm Gives Out Laptops Worth KRW2mn as Company Anniversary Souvenirs

According to a recent report by the Ministry of Planning and Budget, titled “An Assessment of Management of State-owned companies in 2006” submitted to the National Assembly on October 1, some state-owned companies gave loans to their employees at a low interest rate of 2% while others gave them two-million-won laptop computers as gifts marking the establishment day of their companies.

Also, the strong likelihood of “parachute appointments” remains as most of the government officials on the personnel recommendation committee are involved in the appointment of heads of their respective government agencies.

The report was produced by a management assessment team consisting of 155 civilians, including professors, accountants, and researchers, through inspections of 14 state-funded institutes and 75 umbrella organizations.

Too many employee benefits-

The report says that in a labor collective agreement in 2006, the Korea Broadcast Advertising Corp. (KOBACO) partially accepted eight requirements out of 19 from the labor union. The satisfied requirements included: providing laptop computers (worth two million won) to all of the employees when commemorating the 25th anniversary (680 million won in total), and giving them exercise and gym fees of 50,000 won per month (240 million won in total).

The assessment team pointed out, “Compared to other organizations, meeting such requirements is highly likely to undermine the efficiency of state-owned companies.”

The Busan Port Authority lowered interest rates of house mortgages for its employees from 3% to 2% per year. The report comments that considering higher interest rates of commercial banks, this is too much and could arouse suspicions about special favors. Since February 2006, interest rates for housing loans of commercial banks for workers and citizens have been around 5.2%.

Difficult to prevent parachute appointments-

The Health Insurance Review and Assessment Service revised its corporate regulations through special board meetings, which allow the organization to appoint four former officials of the Ministry of Health and Welfare out of nine committee members to recommend the next head of the organization.

Regarding this, the assessment team pointed out that, “This case shows why we need the law on managing state-owned companies which came into force in April this year.”

The purpose of the law was to strictly control the appointment process and qualifications in order to prevent parachute appointments. But it is also pointed out that the law wouldn’t prevent such appointments when the recommendation committee is filled with former government officials.

In the case of Environmental Management Corporation, out of seven recommendation committee members, three are former officials of the Ministry of Environment, which has chief control over the corporation.

Korea Railroad’s labor union members (who are committed to the union only) number 64, far exceeding the government standard of 21. This had been pointed out in 2005 and the assessment team said there should be further discussion on this matter.

Questionable management capability-

The report argues that National Pension Service caused a stir regarding fairness because it takes pension premiums based on voluntary income reports of subscribers without knowing their precise income.

According to the report, the Korea National Housing Corporation (Jugong) set unrealistic goals of providing more than 150,000 house units from next year, when it is capable of providing rental houses at a rate of 50,000-100,000 per year.

Also, Jugong is blamed for irregular practices revealed by National Tax Service: the company helped Hanyang Corporation, its subsidiary company, win a bid for a construction project at higher price than average contract prices.

The report recommends that the Korea Land Corporation should set reasonable standards on the scale of profits and earning rates as it is gaining too much development profit from the Seoul metropolitan area and building sites.

cha@donga.com