The impact of the global economic slump, a weakened won, and rising raw material costs drove net profits at Korea's 297 state-owned businesses down 57 percent last year to just W7.5 trillion (US$1=W1,297). The total amount of debt held by those companies rose W44 trillion to W320 trillion. As expected, state-owned companies are facing worsening business conditions due to deteriorating external factors.
But the average annual salary per worker at those companies last year rose 3 percent compared to 2007 to W55.33 million. That's 70 percent higher than the average W32.38 million annual salary received by workers at privately-owned manufacturing companies. Staff at some 14 state-run agencies were even paid an average of W80 million a year. They include Korea Development Bank, Korea Securities Depository, Industrial Bank of Korea and KDB Capital. Those companies' net profits have halved, while their debt loads have increased. But everyone, from president down to average employee, made sure they got paid more.
Moreover, 67 public companies, including Korea Land Corporation and Korea Housing Guarantee Company, provided W169.2 billion in mortgage loans to their employees. That was 43 percent more than the W118.5 billion in mortgage loans those companies extended to their employees in 2007. Tuition-assistance loans, provided by 162 state-run companies, also rose 10 percent to W130.5 billion. The average increase in wages at state-run companies last year was 3 percent, down from 5 percent in 2007. But those companies bolstered other benefits instead. While employees at public companies were keeping themselves cozy, workers at private companies were always anxious about possible layoffs, as the economy was in recession during the second half of last year.
Looking at the status of union membership at public companies, which was disclosed for the first time this year, it is easy to spot the reasons behind such wanton management practices. Their union membership currently stands at 65.8 percent, with 172,282 of 261,961 workers being unionized. That's six times higher than the 10.8 percent union membership rate at private companies.
With strong power based on its high membership rate, labor unions have virtually served as the owners of these state-run companies. Another reason they can exert such power is that the top management post is appointed by the government with tenure. When top management officials are appointed as political favors, rather than based on their professional abilities, they have a tough time getting employees to follow orders and tend to focus on catering to the unions. Also, as the power of the labor unions grows, more workers naturally opt to become unionized in order to enjoy the benefits, further strengthening their power. This is why previous administrations have failed to reform state-owned companies, although all vowed to do so when taking power.
Until now, the Lee Myung-bak administration has made six announcements detailing measures to reform state-owned companies, while the president himself told the heads of those businesses to step down if they don't have the will to implement reforms. But it seems that state-owned companies, referred to as "jobs offered by god," remain determined to work according to their own rules.