Korea Gas Corp., a state-owned enterprise that effectively monopolizes the import of liquefied natural gas, is said to have raised the annual salary of its executives by 30 percent on average last year despite its mounting debt.
The average annual salary of its board members was 171.48 million won ($128,545) in 2022, according to ALIO, a government system that provides management information on public institutions including state-owned enterprises. The amount was up 30.1 percent from 131.79 million won a year earlier.
Former Kogas President and CEO Chae Hee-bong received annual salary of about 200 million won, up 43.4 percent from a year earlier. It was the largest increase among all of the executives and employees on Kogas’ payroll.
Annual salaries of executive directors of all of the public institutions rose 1.2 percent on average over the same period.
Those of its regular employees increased 6.6 percent to 93.71 million won. Both the amount and increase rate exceeded overall averages for public institution employees -- 70 million won and 1.4 percent.
Salary increase does not matter if an enterprise’s management performance is good, but the reality is not what it appears to be. Last year, its accumulated debt rose to 52 trillion won. Its debt-to-equity ratio is close to 500 percent.
The reason for the sharp rise of annual salaries of its executives and employees is because its grade for management performance went up.
In 2021, Kogas could not offer performance-based bonuses to its executives and employees because it got a D grade -- which means it did not qualify for bonus payments -- in an annual 2020 management evaluation by the Ministry of Economy and Finance.
However, when the ministry evaluated its 2021 performance, its rating ascended to C, a grade that qualifies it to pay bonuses. As a result, last year its chief executive received a bonus of 61.66 million won, and each employee 4.4 million won. Other executives on the board saw their salaries rise 34.9 percent from a year earlier when no bonus was offered.
Even as many companies were struggling under heavy debts and consumers were worrying about heating costs, the ministry judged that Kogas executives and employees deserved bonus.
It is brazen of Kogas executives to take bonuses, but more problematic is the biased evaluation method that fails to assess management performance properly.
The Moon Jae-in administration changed its public institution evaluation method in 2018. On the 100-point evaluation scale, it increased points allotted to the section of social values such as hiring non-regular workers directly as regular staff and employing socially disadvantaged people, from 11 points to 25. On the other hand, it reduced its perfect score in the finance-related section from 10 points to five.
Because of this change, even a state enterprise in financial crisis was able to get a good grade if it scored high in evaluation items other than finance, such as employment and community development.
Kogas was given the lowest point in the category of debt, but received a C grade thanks to a high score in the item of mutual cooperation and community development.
The state-owned Korea Electric Power Corp. was also rated eligible to offer bonuses to its employees, as it scored high in the items of job creation and social integration despite its astronomical debt of 192.8 trillion won.
In the evaluation system, debt reduction did not matter so much as before. Total debt of public institutions surged from 500 trillion won in 2018 to 670 trillion won in 2021.
It is hardly justifiable for the government to demand public enterprises pursue only profit. And yet it must not impose politically motivated goals on them. If they are badly managed and get into financial crisis, at the end of the day, it is the people who will bear the burden of reviving them.
The new administration increased evaluation points allotted to financial indices while reducing the weight of social values. Never again should an incident of public-enterprise executives receiving bonuses despite the aggravating financial status of their corporations ever happen.
