State-run Bank Gave 275 Pct. Bonuses to Staff

Industrial Bank of Korea is found to have paid its employees incentives early this month that exceeded limits.

Critics questioned how excessive bonuses were paid to employees of a state-run bank amid the severe economic slump. The government owns 60 percent of the bank.

Industrial Bank and the Financial Services Commission yesterday said the bank received the highest grade of “S” in the financial watchdog’s assessment of last year’s performance. As a result, the bank paid employees incentives rewarding the achievement.

When paying bonuses, the bank applied the maximum rate of 275 percent of employee base salaries allowable for staff of a state-run company that earns the “S” grade. Industrial Bank employees received an average bonus of 8.5 million won (6,740 U.S. dollars) per person, and the average annual salary was an estimated 89.65 million won (71,150 dollars) for this year, including bonuses.

Mindful of the economic slump, the bank made no mention of the incentives to its staff. Its union chief in an e-mail sent in late May also urged its 5,400 members “not to publicize the payment since it could cause unnecessary misunderstanding.”

An Industrial Bank employee said, “It was uncomfortable for me to receive an incentive that the bank does not want to publicize.”

Another bank source said, “We paid incentives up to the limit based on the result of the Financial Services Commission’s assessment every year, and we did the same this year.”

“The bank’s employees are striving to share the burden stemming from the economic slump, with senior staff above branch manager returning five percent of their pay. So the pay levels of our staff will decline a bit this year.”

An official at the financial watchdog said, “The aggregate ceiling of payable incentives according to the results of managerial assessment is set by the government, but this doesn’t mean the bank has to spend all that money on giving out incentives.”

The pay at Industrial Bank has rapidly matched those of other state-run financial institutions. The bank’s average annual salary rose from 79.31 million won (80,000 dollars) in 2006 to 84.84 million won (85,000 dollars) in 2007 and to 85.63 million won (67,960 dollars) last year.

In contrast, the average annual pay of Korea Development Bank employees declined from 92.96 million won (73,800 dollars) to 92.67 million won (73,540 dollars). That of the Export-Import Bank of Korea employees fell from 84.61 million won (67,200 dollars) to 84 million won (66,670 dollars).

Annual wage growth between 2004 and 2008 was also higher at Industrial Bank at 22.9 percent. The figure for Korea Development Bank was 15.7 percent and that for Export-Import Bank 9.5 percent.

peacechaos@donga.com