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[Editorial] Not-so-free market

Yoon administration, ruling party must limit meddling in private firms

March 7, 2023 - 18:43 By Korea Herald

Governments in advanced countries tend to avoid directly intervening in the private sector for fear of distorting market mechanisms. In this regard, the government’s industrial policy, such as a state-initiated guide on prices for products and services, is supposed to be used only when it is necessary.

Unfortunately, the Yoon Suk Yeol administration and some of the ruling party members do not follow such basic rules. It is ironic that Yoon often preaches the virtue of the free market, but freely ignores it in select cases.

One glaring example is the apparent interventions of the Yoon administration and the members of the People Power Party in the selection process of a new CEO for KT. This may well come off as strange for foreign investors, whose combined stake in KT reached some 43 percent at the end of 2021, according to the telecom company's website.

In the eyes of foreign investors, KT is clearly a private company in every aspect. But Korean politicians do not think so, somehow ignoring the fact that KT, formerly Korea Telecom, was privatized in 2002.

A look at what has happened in the past months demonstrates underlying problems with the way the government and ruling party members view KT. The telecom powerhouse selected four final CEO candidates -- all of whom have built careers in KT -- to head the company, as its incumbent CEO Ku Hyeon-mo decided not to seek a second term last month amid mounting speculation about pressure from the government.

On Thursday, the seven ruling party members at the National Assembly’s Science, ICT, Broadcasting and Communications Committee publicly slammed the CEO screening process at KT, taking issue with the outcome in which the four candidates who passed the screening are all former or incumbent KT executives, while 29 other contenders, including those with different backgrounds, were disqualified.

The ruling party members called the outcome a result of an “exclusive league” and “cartel” in which KT employees pursue vested interests. The presidential office piled on, saying that fair and transparent governance should be implemented at KT.

There are reasonable doubts as to why Ku was kicked out of the race, even though he was credited with having navigated the telecom heavyweight relatively decently through a difficult period.

The dispute traces back to November last year when Ku expressed his intention to seek another term as CEO. In December, the state-run National Pension Service, the largest shareholder of KT, voiced opposition against the telecom company’s decision to endorse its incumbent CEO as the sole candidate for the top position.

In January, President Yoon shared his view by stressing “fair and transparent governance” of a company which does not have an owner. KT’s board of directors halted the ongoing CEO selection procedure and started from scratch, seeking candidates publicly. KT’s selection committee reviewed 33 applicants from inside and outside of the company, and finalized a list of four candidates, all of whom happened to have had careers at KT.

The government and ruling party members raise the issues of transparency and ethical risks, but critics point out that their opposition to the prospect of a KT CEO hailing from the company is a high-pitched reaction to the screening result that eliminated former members of Yoon’s election camp and former ruling party members -- “parachute candidates” with little or no expertise in telecommunications.

As a result of the meddling by the government and the ruling party, KT’s share price took a dive, as institutional and foreign investors sold shares, lowering its price from 37,950 won ($29) on Dec. 12 to close at 30,500 won Monday.

It is regretful that the Yoon administration’s intervention in the CEO selection procedures of private companies is not limited to KT. The government’s unwarranted meddling in the financial sector, for instance, has widely been reported in recent months, raising questions as to whether Yoon pronouncements about free market principles are more than lip service.