[Editorial] Philosophically correct

On Thursday, the Board of Audit and Inspection, which looked into the books of eight government-invested corporations in September and October last year, announced the outcome of the audit, focusing on the alleged mismanagement of KDB Bank. When it came to Korea Eximbank, Korea Exchange and Korea Security Depository, it found fault with minor issues. It made no mention of the remainder.

The state watchdog said KDB Bank is set to sustain 140 billion won in losses this year alone because it began to offer unwarrantedly high interest rates than other banks for its new time deposits with one-year maturity in September 2011. But KDB Bank defended itself, saying that it could offer higher rates because it successfully cut its promotion expenses by soliciting deposits on the Internet.

Bonus payments were also at issue. The watchdog said that KDB Bank overstated its operating income by up to 244.3 billion won in 2011 and, by doing so, overpaid bonuses by up to 4.1 billion won. But KDB Bank claimed it faithfully followed the accounting guidelines set by the Ministry of Strategy and Finance when it was reporting its operating income. If any mistake was made, KDB Bank said it was not the bank but the ministry that should be held responsible.

Now the question is why it took the watchdog as long as four months to make the announcement and why the announcement followed the presidential guidelines for appointments to the top posts of government-invested or -funded organizations that had been made earlier in the week.

No less serious a question is why the watchdog singled out KDB Bank for the grave charges of mismanagement. Was it because the KDB Financial Group, with KDB Bank being its flagship, is headed by Kang Man-soo, the architect of the previous administration’s economic policy? Undoubtedly, it was not only Kang, former President Lee Myung-bak’s first finance minister, who may have wondered if the watchdog did so to curry favor with President Park Geun-hye ― if not following direct orders from her ― who may wish to make a clean break with her predecessor, as is often the case with newly elected leaders.

Park said at her first Cabinet meeting last Monday that heads of government-invested or -funded organizations must be selected from among those who share her administration’s governing philosophy. Her remarks were perceived by many to herald sweeping reshuffles in the managements of government-invested corporations and various public institutions under the supervision of each ministry.

Another group of organizations whose managements may be affected by the inauguration of a new administration are business concerns that are now privatized. It includes the steelmaker POSCO and KB Financial Group. The Lee administration threw its weight behind the selection of their current chief executive officers.

No wonder, Euh Yoon-dae, chief executive officer of KB Financial Group, is often mentioned as a potential victim of Park’s selection guidelines for his close connections with Lee, along with Kang and Lee Pal-seung, chief executive officer of Woori Financial Group.

Individually, they may have nothing much to complain about, given that they were among the beneficiaries of Lee’s much criticized policy of “anything but Roh Moo-hyun,” with Roh being his immediate predecessor. Three months after its inauguration, the Lee administration demanded All heads of government-invested or funded organizations tender their letters of resignation for a review of their political orientation.

When Park was remarking on her selection guidelines, she appeared to be rephrasing her predecessor’s policy. Five years ago, Yu In-chon, then minister of culture, sports and tourism, who championed Lee’s policy, said, “Those whose political beliefs are colored by that of the previous administration will have to go on their own.” In his testimony before the National Assembly in July 2008, Kang also acknowledged that the letters of resignation were demanded as a “political process” of reviewing the qualifications of the officeholders.

From an institutional perspective, however, it would be an ill-conceived policy if the Park administration demanded all chief executive officers resign simply because they were appointed by the previous administration. All those who wish to serve out their legally guaranteed terms in office must be allowed to do so unless they have made any serious mistakes.

If Park’s selection guidelines are ever to be applied, they had better be applied when top posts are vacated under no undue pressure. Here again, her administration needs those with proven credentials for management skills, rather than those deemed to be incompetent but philosophically correct.