Top executives of listed companies including chaebol chiefs may have to disclose their income under a recently submitted bill as the political drive for “economic democratization” gains momentum.
Rep. Rhee Mok-hee of the Democratic United Party and nine other lawmakers submitted a revised bill that requires listed firms to make public the compensation of each board member and the standards by which the wage was calculated.
Following similar bills that were laid out in the 17th and 18th National Assembly, the latest proposal comes as both ruling and opposition legislators call for corporate transparency, balanced growth and equitable income distribution ahead of the presidential election in December.
The bill, however, may be pushed aside again as parties get absorbed in political struggles for the presidential election. This month’s extraordinary National Assembly remains idle, and from September, serious discussion could be unlikely with the election eclipsing all issues.
Presently, listed companies only state the total payroll for board directors in their business reports.
Hyundai Motor, for instance, said it paid a total of 8.4 billion won to four board directors including chairman Chung Mong-koo in last year’s report.
Samsung Electronics said it paid 32.69 billion won to three board directors last year, but since chairman Lee Kun-hee is not a board director, his paycheck wasn’t even included.
Revealing the salaries of individual executives is a global trend.
The U.S. introduced the system in 1992, Britain in 2002. Japan drew up rules in 2010 that require revealing the pay of board directors who earn more than 1 million yen (1.4 billion won) a year.
“If advanced nations are doing it, the disclosure is worth giving thought,” Rep. Kang Seog-hoon of the ruling Saenuri Party who sits on the parliamentary committee for national policy said.
Rep. You Seung-hee, co-chief of the DUP’s research group on economic democratization, agreed.
“Disclosing the salaries of each board director at listed firms needs a positive review to keep chaebol chiefs from abusing their power. Most advanced countries are doing it,” she said.
Lee Ki-woong, a senior staff member of the Citizens’ Coalition for Economic Justice, said the wage disclosure would help strengthen shareholder rights and allow social feedback, realizing economic democratization.
Businesses, however, are against it.
“If the compensation for each board member is made public, comparison with other companies could lower the management’s morale or generate a sense of incompatibility between labor and management,” an official at the Korea Listed Companies Association said.
In the U.S., listed companies are required by law to disclose the wages of all board directors and the five highest paid people including the chief executive officer and the chief financial officer. Bonuses and incentives must also be specified.
The same extent of disclosure applies to board directors in Britain, but not to the executive managing staff.
Experts such as Yoon Jin-soo of nonprofit organization Corporate Governance Service said that revealing the compensation for top executives is a must for responsible corporate management.
“On Wall Street, if a top company executive with poor management results is paid a fat paycheck, authorities launch an investigation. But in Korea, the lack of information disclosure makes shareholder movement and responsible management difficult,” he said.
By Kim So-hyun (email@example.com