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Public enterprises to receive performance pay despite losses

Public enterprises to receive performance pay despite losses

Posted June. 21, 2022 07:57,   

Updated June. 21, 2022 07:57


The Ministry of Strategy and Finance announced results of the management performance review of 130 public corporations on Monday, with 55 percent of the institutions receiving ‘outstanding,’ ‘competent’ and ‘fair’ ratings and thus performance pay. Meanwhile, 18 institutions were rated as ‘underperforming’ or ‘severely underperforming,’ but only the head of the Korea Maritime Transportation Safety Authority would be removed. This is because the terms of most heads of the institutions are less than six months or currently absent, disqualifying for penalty. The results were far from the business reform ambitions for public corporations that the new government promised.

Public corporations had enjoyed excessive benefits, getting away with astronomical amounts of loss and deviation. Many of them receive performance pay and the number of those that get penalties are a limited few, due to the lack of accuracy and fairness of public institution performance assessment. The government merely recommends the CEO to return the performance pay for public corporations that saw massive losses last year, including KEPCO. Meanwhile, performance pay is given out to public enterprises not only to those that received ‘fair’ but also ‘meeting expectations,’ reflecting indiscriminate payout.

It’s not the first time public corporations have been criticized for lax management, but this shows that public restructuring still has a long way to go. With new hires of 100,000 employee, the combined debt of public enterprises amounted to 583 trillion won, which is 90 trillion won higher than that of four years ago. The number of public enterprises with average annual pay of 100 million won was 20 last year, four times higher than that of 2017. The iron rice bowl of public institutions is growing more than ever, despite the fact that we are even unable to pay off the interest with the money they managed to earn.

The Ministry of Strategy and Finance should adjust the assessment of public institutions, but it is questionable whether mere adjustments would be enough to make a thorough and objective assessment of public sector performance. Drastic, full-scale reform is needed to enable public institutions to focus on their key mission to improve public interests. Above all, the public reform stressed by the incumbent government should start by severing old ties between government offices and public institutions, using political connections to land positions at public corporations. No reform in the private sector can be executed unless the public sector does it properly first.