Unregistered executives from chaebol families paid as much as five times more than registered professional managers

Kolon Chairman Lee Woong-yeol

Registered executives have to bear legal responsibility for management decisions

Kolon Chairman Lee Woong-yeol

Average severance pay for executives from the controlling families of South Korean chaebols was as much as five times higher than for professional managers last year, a study reports. The average compensation received by chaebol family members as unregistered executives for listed companies was also found to be higher than for all registered executives.

The Economic Reform Research Institute (ERRI), which is led by Korea University professor Kim Woo-chan, published a report on Sept. 16 titled “An Analysis of Highly Compensated Executives at Listed Companies in 2018.” The report by researcher Kang Jeong-min found that the average compensation (not including severance) for 30 South Korean chaebol family members who reported compensation as unregistered executives last year amounted to 2.264 billion won (US$1.9 million) – a larger total than the average compensation of 1.94 billion won (US$1.6 million) for all 85 of the corresponding companies’ registered executives. Regulations were changed last year to require reporting of individual compensation for the five highest-compensated executives with total annual compensation exceeding 500 million won (US$420,515) as of last year’s business reports, even if they were not registered executives.

The chaebol family member receiving the most compensation as an unregistered executive was Lee Jay-hyun, chairman of the CJ Group, who received a total of 16.011 billion won (US$13.47 million) – including 7.187 billion won (US$6.04 million) from CJ, 6.497 billion won (US$5.46 million) from CJ CheilJedang, and 2.327 billion won (US$1.96 million) from CJ E&M. Other unregistered executives receiving large compensation included Shinsegae Group Chairwoman Lee Myung-hee (1.067 billion won [US$897,411] from Shinsegae, 3.069 billion won [US$2.58 million] from e-mart), KCC Honorary Chairman Chung Sang-young (923 million won [US$776,298] from KCC, 921 million won [US$774,616] from KCC Engineering & Construction, and 1.517 billion won [US$1.28 million] from Korea Auto Glass), Hansol Group Chairman Cho Dong-gil (2.99 billion won [US$2.51 million] from Hansol Paper), and Hyosung Group Honorary Chairman Cho Seok-rae (2.7 billion won [US$2.27 million] from Hyosung).

“With individual compensation reporting instituted as of last year for the highest-earning unregistered executives and employees, it has emerged that a large number of controlling shareholder family members are earning large compensation taking part in management as unregistered executives,” ERRI said.

“It is problematic for unregistered executives to be earning more than registered executives, who bear legal responsibility for management decisions,” the institute argued.

Average severance pay for the nine chaebol family members who received it last year totaled 6.032 billion won (US$5.07 million), or 5.06 times the 1.192 billion won (US$1 million) average for 200 professional managers (non-chaebol family members). Kolon Chairman Lee Woong-yeol received 2.96 billion won (US$2.49 million) in severance pay, while LG Chairman Koo Bon-moo received 2.01 billion won (US$1.7 million) and KAL Senior Vice President Cho Hyun-min received 1.3 billion won (US$1.09 million).

By Kwack Jung-soo, senior staff writer

Please direct comments or questions to [[e-mail]]

Caption: Kolon Chairman Lee Woong-yeol