[Editorial] Ill-advised CEO change

Chung Joon-yang, chairman and chief executive officer of POSCO, offered to resign last Friday. He did so well ahead of the expiry of his term in office, which had been set for February 2015.

But the news did not come as a surprise. Nor would anyone have believed him when he said he was under “no outside pressure” when he decided to step down when the next shareholders’ meeting was held next March.

The days of his stay in office were numbered when Park Geun-hye was elected president in December. Chief executive officers of the steelmaker have had to resign each time a new administration was inaugurated ― a strange tradition that has been established since Kim Dae-jung was sworn in as president in February 1998.

Personally, Chung cannot hold too big a grudge against the Park administration, as he himself owes his chairmanship to the previous administration. The path for his ascendancy to the top POSCO post was paved when the Lee Myung-bak administration forced his predecessor out of office.

Still, his ouster poses a serious challenge to corporate governance. The government has no stake in the multinational steelmaker. It disposed of its shares when the company, which had started as a government-owned enterprise, was privatized in 2000.

But the government wields enormous power over the selection of top managers. The key reason is that the company has no dominant shareholder. Another reason is that the government has the power to look into the company’s books and launch criminal investigations into allegations, no matter how flimsy they may be, about top managers having embezzled corporate funds or engaged in other types of corruption.

A similar case involves Lee Seok-chae, who resigned earlier this month from the post of chairman of telecommunications giant KT, which remained a government-owned company until it was privatized in 2002. He left the company three weeks after the prosecution launched an investigation into his allegedly illegal business practices.

Of course, the presidential office denies it had a hand in the decision made by either Chung or Lee. Still, almost all of those whose names are dropped as their potential replacements are given credit for having made contributions to Park’s election.

When the next POSCO and KT chairmen are selected from among them, their allegiance is most likely to lie with the Park administration rather than the shareholders. That is the reason why those with a stake in such companies band together around leading minority shareholders and put up candidates of their own for the CEO posts.

There is no other way for them to select CEOs who can be held accountable solely for shareholder interests. They need to establish a new governance system if they desire to shield themselves from undue outside influence.