State-run companies go too far in lax management practice

State-owned companies turned out to mislay their moral compass and get involved in lax management, according to the Board of Audit and Inspection on Tuesday. It found that former President and CEO Chae Hee-bong of the Korea Gas Corporation (KOGAS) spent 2.6 million won per night staying at a hotel suite room in Britain for three days in April last year. He spent five times more than 480,000 won per night, or the upper limit on hotel expenses allowed for heads of government-owned companies, equivalent to vice ministers. Having served as presidential advisor for industry and energy policy under the former Moon Jae-in administration, Chae took charge of KOGAS and completed his term by the end of last year.

What’s worse, KOGAS last year recorded an uncollected amount (loss) of 8.6 trillion won and a debt ratio of as high as 500 percent, going downhill financially. Despite a series of austerity measures taken at the management level, the then-CEO made as many as 16 business trips overseas during his three-year and six-month term and spent an average of 870,000 won on lodging per night. As there is no upper cap placed by the rules on lodging expenses during overseas business trips, relevant expenditures spent by the company’s executive-level staff for three years exceeded the upper limit on public servants by more than 76 million won.

All the evidence of Chae’s extravagant tours mirrors how KOGAS was lax about managing its organization while recklessly giving out bonus payments to its management and employees despite losing several trillion won. As of last year, 34 percent of its management and employees earned more than 100 million won in annual salary while the company provided them with low-interest loans internally, even against the government’s guidelines. All such managerial laxity may well explain why it has made little progress in resolving its financial difficulties for the sake of the normalization of corporate management, even with the 15-trillion-won plan to sell real estate assets and freeze workers’ pay announced in May.

The case of KOGAS is only one example of how irresponsibly and recklessly state-run companies work. For instance, employees of the Korea Southern Power sneakily shared confidential information to buy corporate housing. Afterwards, they filed a lawsuit against the company, arguing that it should buy it for 10 billion won. Simply put, they took advantage of the residences as a holdout. A worker at the Korea Water Resources Corporation was awarded land compensation in a dishonest way by borrowing his father’s name on paper. Some employees at the Korea Land & Housing Corporation and the Korea Railroad were caught going AWOL to have fun at a racing track. As if that were not enough, a big spree of 7.7 billion won was spent on buying around 5,000 employees new laptops at the Korea Rural Community Corporation.

It has been a while since working at a government-owned company was considered a heaven-sent or “iron rice bowl” job. Nevertheless, only failed attempts have been made to restructure the public sector. Added to this, since the former administration involved state-run companies in phasing out nuclear power and shifting part-timers to permanent employees, they have grown too big and fared poorly management-wise. Even with more than 100 trillion won in government subsidies, their debt has reached 670 trillion won. Indeed, the combination of their inefficient management practices and the government’s lack of supervision has driven them into a state of moral laxity.

The incumbent administration should not follow in the predecessor’s footsteps of aggressively pushing forward with public sector reform at first but fizzling out in the end. The burden of picking up the pieces should not be tossed onto the shoulders of citizens as they already struggle with high interest rates, soaring prices, and low growth rates.