|
Hanjin Group Chairman Cho Yang-ho
|
Solidarity for Economic Reform protests outrageous severance package for negligent executive
With Hanjin Group Chairman Cho Yang-ho set to receive tens of billions of won in severance pay, Solidarity for Economic Reform (SER) sent a written inquiry to the board of directors of Korean Air Lines on Apr. 3. “The massive severance payment that Cho Yang-ho is expected to receive when he steps down from management at Korean Air remains controversial. The failure to revoke or sharply reduce the excessive severance at the time of Cho’s departure from the company would be an explicit example of harming stockholders’ value,” SER said in a press release issued on Wednesday. “The board of directors must be held accountable for neglecting its oversight duties,” SER added. According to SER, it’s estimated that Cho will receive at least 61 billion won (US$53.71 million) when he steps down from his post as registered director for Korean Air. The amount of severance owed to a chairperson was greatly increased when Korean Air altered its rules for executive severance in 2015. Prior to that, the rules stated that executives at the rank of vice president or higher would be paid the average compensation for four months, multiplied by their number of years in service, in severance pay, but this was adjusted so that a chairperson would receive six months of pay. Cho was promoted to an executive at Korean Air in 1980 and assumed the chairmanship in April 1999. Considering that he received a salary of 3.13 billion won (US$2.75 million) from Korean Air last year, SER explained, Cho will receive at least 61 billion won in severance pay. SER also blasted Cho for pocketing a total of 10.7 billion won (US$9.42 million) in compensation last year from five listed affiliates of the Hanjin Group, including Korean Air, Hanjin KAL, Jin Air and Hanjin. “Cho’s compensation increased by about 4 billion won (US$3.52 million) from the previous year, showing how he disrespects stockholders and the market by treating the company like his own personal possession,” the group said. No financial or accounting expert on Korean Air’s auditing committee SER also criticized Korean Air for not having an accounting or financial expert on its auditing committee. The person selected to be the committee’s “accounting or financial expert” is Kim Dong-jae, a professor at Yonsei University’s Graduate School of International Studies, but Kim is not an expert according to the commercial code, SER claims. Korea’s commercial code states that at least one of the members of an auditing committee must be an accounting or financial expert as defined by presidential decree and provides the following qualifications for such an expert: five or more years performing related work as a certified public accountant, five or more years working as a researcher or assistant professor or higher following the receipt of a master’s degree or higher in accounting or finance, or five or more years of work as an executive in accounting or finance at a listed company. “While Kim Dong-jae does have experience working as a consultant for McKinsey, we were unable to confirm any experience that would qualify him to be an expert in accounting or finance under the commercial code,” SER said. The inquiry that SER sent to the Korean Air board of directors on Apr. 3 asks the company to address the following questions: whether the company is planning to curtail or refuse to pay Cho’s severance; whether the regulations for paying executive severance include any provisions for reducing pay because of illegal behavior or actions that harm the company; what the company’s position is on deleting the rules that provide excessive severance to chairpersons; and why, and for what specific grounds, the company deemed Kim Dong-jae to be an expert in accounting or finance. By Shin Min-jung, staff reporter Please direct comments or questions to [english@hani.co.kr]
