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[Editorial] Ineffectual CEOs

Incheon Transit Corporation has invested 85.3 billion won to build a monorail system linking the major sightseeing spots in Incheon. The project, touted as the nation’s first urban sightseeing light rail, was completed last year but is still not open for public use. The main reason is that serious safety problems were found during trial operations. The system is now under scrutiny by an independent investigation team, which could decide to demolish it.

The Incheon monorail is only one example of the many projects promoted by local public corporations without thorough supervision or a clear business plan. One reason for the lack of professionalism marking the projects is that their CEOs are often former politicians or bureaucrats who have close ties with the heads of the local governments that control the corporations.

According to the Ministry of Public Administration and Security, about 75 percent of local public corporations across the nation are currently headed by retired politicians or former bureaucrats who once worked for the local governments that fund their operations. The percentage is more than 90 percent in the case of corporations managing local industrial complexes.

Local public enterprises cannot be expected to function properly when they are led by retired politicians or bureaucrats who have no experience in corporate management. In fact, many of them are in debt over their heads as a result of carrying out projects promoted by local government heads for political reasons. As of June last year, 51 major local public corporations had a combined debt of 46 trillion won, more than double the 22 trillion won in 2006.

The first step toward normalizing local public corporations is to reform the CEO appointment process. Currently, local government heads appoint CEOs based on the advice of candidate recommendation committees. But this process is little more than a formality. In many cases, local government heads handpick candidates close to them. The selection process should be made more open and transparent to eliminate cronyism at local public corporations.
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