Land-Housing Corp. Hikes Bonuses Instead of Downsizing

Korea Land & Housing Corp., which has suspended its projects across the country because of snowballing debts that incur interest of 10 billion won (8.5 million U.S. dollars) per day, will pay 100 billion won (85.2 million dollars) in bonuses this year as well as spending a tremendous amount on educating surplus staff.

According to the documents provided by ruling Grand National Party Rep. Jang Yoon-seok Thursday, the company has been educating 250 people at universities or think tanks this year. Fifty of them are taking a social overhead capital policy course at Seoul National University, 39 a development management policy course at Hanyang University, and 30 an urban development expert course at Kyungwon University.

As many as 24 people were sent overseas for training and among them, seven are taking a course on advanced comprehensive urban planning and development at Michigan State University.

The reason is that many staff remain idle after the merger of the Korea Land Corp. and Korea Housing Corp. in October last year. The newly merged company was supposed to reduce the number of employees from 6,923 to 5,600 by 2012 under a plan to advance public corporations, but downsized just 13.5 percent of its goal, or 1,323 workers.

Since the integration, the size of the entity was downsized while the number of staff remained unchanged, which led to a two-fold increase in the number of people undergoing education than before the integration.

The corporation has offered 6.2 billion won (5.28 million dollars) to 250 people who are studying and offered as much as 78 million won (66,470 dollars) per person, including cost for living for those studying abroad. Those undergoing education are receiving the same salary except for overtime pay. The payment to employees for the first half of this year is 11.6 billion won (9.8 million dollars).

Moreover, the company is paying all bonuses for this year to those who worked for more than two months and are now studying. Since most curricula start in March, it offered bonuses well as monthly payments to most of its employees.

A combined 106.2 billion won (90.5 million dollars) was set aside for this year’s bonuses, of which 94 billion won (80.1 million dollars) has been paid. Though debts are snowballing, bonuses were increased 59.5 percent from last year.

The bonuses are set after an evaluation by the Strategy and Finance Ministry every year, and the corporation got the second highest grade of "A" among six grades in last year’s evaluation.

The company`s debts reached 109 trillion won (92.8 billion dollars) at the end of last year for a debt ratio of 24 percent, but since the share of financial soundness among other evaluation categories accounted for only three percent of the total, Rep. Jang said the company got a high grade.

“Given the situation of the company, bonuses can be returned but this is not an issue the CEO can decide alone,” a source from the company said. “I was told that improvement measures for financial structure, which will be announced at the end of next month, will include restructuring and payroll issues.”

In response, Rep. Jang said, “I am worried that the land and housing corporation has become insensitive to billions of won (millions of dollars) since it has to pay 10 billion won (8.5 million dollars) per day in interest. It should show painstaking efforts to make the people understand before it receives the help of taxpayers’ money.”

The Land, Transport, and Maritime Affairs Committee of the National Assembly will call the corporation`s CEO Lee Ji-song Tuesday for a Q&A session on pending issues such as excessive bonuses.

egija@donga.com