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`Parachute appointments` ruined Daewoo Shipbuilding

Posted September. 22, 2015 07:01,   


During Monday`s inspection of the administration, the National Assembly`s Political Affairs Committee revealed how people having close connections with those with political power were parasitic on a large corporation and ruined it. Daewoo Shipbuilding &Marine Engineering Co., which has been found to have hid more than 3 trillion won (2.6 billion U.S. dollars) in losses through alleged accounting fraud, hired 60 people as consultants or advisors who received hefty salaries, vehicles and other benefits without performing any particular jobs. The shipping company has been ridden with "parachute appointments," or political appointment of former politicians and bureaucrats into public and private corporations. The advisor jobs at Daewoo were taken by its former CEOs, who were responsible for the company`s troubles, and ex-officials from state-run banks that had influences on Daewoo, and other government agencies. Among the 18 outside directors newly appointed since 2008, 12 of them were ex-politicians or government officials. Five of the seven outside directors appointed under the Park Geun-hye administration were also "parachutes" who had nothing to do with the shipping industry.

Many former officials from the state-run Korea Development Bank (KDB), Daewoo`s largest shareholder, also took jobs at the shipping company. All of the 102 officials retired from the KDB since 2008 have landed on new jobs at Daewoo, KDB subsidiaries or KDB-invested companies. Even though the Board of Audit and Inspection instructed Daewoo in 2013 to stop paying fees to its retiree-turned advisors, the company failed to halt the practice for a reason. The parachute appointees closed their eyes to Daewoo`s lax management and losses in return for advisor or outside director fees, creating a mutually beneficial "ring of corruption."

Since the past, it has been widely rumored that the presidential office Cheong Wa Dae picks the CEO for Daewoo. Former Daewoo CEO Nam Sang-tae, who was appointed in 2006, was suspected to have lobbied for his third term in office in 2011. Kang Man-soo, then chairman of the KDB Financial Group Inc. and one of the most influential official under the Lee Myung-bak administration, expressed concern about Nam, saying, "I don`t know how he had the guts but he said he wanted a third term."

Daewoo Shipbuilding &Marine Engineering was created in 1999 as part of the debt restructuring for the insolvent Daewoo Group. It is the people`s company, as 2.9 trillion (2.5 billion dollars) of taxpayers money was injected into the shipping company to keep it afloat at that time. With a whopping 21 trillion won (17.8 billion dollars) in financial liabilities already, a large amount of hidden losses have been uncovered, sparking concerns over a possible liquidity crisis. After the financial authorities examine Daewoo`s books, financial institutions will pour large amounts of money into the company, and the money will come out of the people`s pockets.

At Monday`s parliamentary inspection session, Hong Ki-taek, chairman of the KDB Financial Group, avoided mentioning the KDB`s responsibilities for Daewoo`s massive losses or gave irrelevant answers, saying that there was a "limit" in the KDB-appointed chief financial officer`s ability to understand production costs. What solution can we expect the KDB chief, who admitted he was a parachute appointee, to have other than reading a script?