The Ministry of Strategy and Finance will give more power to its steering committee to boost its oversight and evaluation of hundreds of state-run companies, institutions and quasi-sovereign enterprises, it said Sunday.
The committee will be given more authority to operate like a “creditor bank” over the management of state-run companies to prevent executives from running the companies recklessly under heavy debt and receiving excessive pay and benefits.
It will strengthen its management evaluation of state-run companies’ governance, business projects and finances.
Executives that fail to meet its standards will be prevented from issuing debt securities and have their executive salaries slashed.
The Park Geun-hye government plans to come up with measures for reforming and overhauling the management systems of state-run enterprises by the end of this year for National Assembly approval, the Finance Ministry said.
It is reportedly currently moving to cut executive pay at 10 public companies.
This toughened stance came after Deputy Prime Minister and Finance Minister Hyun Oh-seok met with heads of public companies last week and told them that the government would put a stop to their years of reckless management and excessive pay.
“The party is over now. We should face reality and try to find a solution to the problem that concerns the state-run enterprises,” the finance minister chided.
The move is part of efforts to regain public trust in state-run enterprises, which have been branded as overleveraged companies with overly comfortable executive posts.
Public companies have mostly seen their debt accumulate over the last five years due to heavy infrastructure and energy spending.
Fourteen infrastructure companies’ debt increased 62 percent to 199 trillion won ($187 billion) between 2008 and 2012, while nine energy companies’ debt rose 87 percent to 130 trillion won in the same period.
The rise in borrowing was due to previous government-led infrastructure projects such as the four-river restoration project and overseas energy development and production.
State-run and quasi-state enterprises, including Yeosu Gwangyang Port Authority, Korea Hydro & Nuclear Power and Korea Investment Corp., got low grades in evaluations in the first half of this year for being “incapable of running their companies with mid- to long-term strategic vision.”
Korea’s state-run energy companies such as Korea Hydro, Korea Coal and Korea National Oil Corp. also received “extremely poor” grades for inefficiently managing their businesses.
