South Korean Conglomerate CEO’s Find Ways to Not Reveal Salary
luvsmiling, April 2, 2015, 11:07 a.m.
Rules calling for the disclosure of the salaries of corporate bosses who earn more than W500 million a year are failing to bite (US$1=W1,110). Instead of declaring their earnings, conglomerate owners simply step down from the board of directors, raising concerns that transparency is making no progress at all.
Many CEOs relinquished their board positions at shareholder's meetings held last year. Disgraced SK Group chairman Chey Tae-won, who is in jail, and fellow convict Hanwha Group chairman Kim Seung-youn took the lead because they had no choice.
But there was no obvious reason for CJ Group chairman Lee Jae-hyun and Shinsegae vice chairman Chung Yong-jin to step down from their boards -- unless they wanted to keep their earnings secret. Out of 1,370 companies owned by conglomerates, the number of subsidiaries where at least one member of the founding family is a director member fell from 375 in 2013 to 312 last year.
Listed companies have been required since last year to reveal the annual salaries of board members who make more than W500 million a year. The only corporate chiefs to reveal their salaries under the new measure were Hyundai Motor chairman Chung Mong-koo, LG Group chairman Koo Bon-moo, Lotte Group chairman Shin Dong-bin, Hanjin Group chairman Cho Yang-ho and GS Group chairman Huh Chang-soo.
One industry insider said, "At this rate the measure is useless." There is also controversy over the measure itself. Critics say that all senior corporate executives should declare their earnings. They cite examples in the U.S. and other advanced economies where the salaries of top management executives are made public to give shareholders an opportunity to prevent overpaying.
But others say the U.S., Japan and Germany have different objectives than Korea in making fat-cat salaries public. In those countries the top management can form committees to determine their own wages, which requires a separate monitoring mechanism. But in Korea, the salaries of corporate chiefs need to be approved by shareholders, which some say is enough transparency and there is no need for the wider public to know.
Meanwhile, Chung at Hyundai earned W21.6 billion from the automaker and affiliates Hyundai Engineering and Construction and Hyundai Steel, the fattest pay check. It includes a W9.5 billion in retirement pay Chung received after stepping down from his board position at Hyundai Steel. If that is excluded, Chung made around W12.1 billion last year, less than the W14.6 billion pocketed by Shin Jong-kyun, the head of Samsung Electronics' mobile communications business.