11 Earn Over 5 Billion Won, Some Over 10 Billion Won
The annual salaries of the registered CEOs of domestic listed companies were revealed simultaneously on March 31, to conform to a reformed Capital Market Act forcing registered CEOs with over 500 million won (US$469,500) in salary to include their pay in their business reports.
On March 31, the last day to reveal the salaries of major companies’ CEOs, business circles seemed to be in disarray, since the salaries had never made public before.
Notable in the rankings were Jung Mong-gu, Chairman of Hyundai Motor Company (14 billion won (US$13.1 million)), Gu Bon-mu, Chairman of LG Group (4.4 billion won (US$4.1 million)), and Huh Chang-soo, Chairman of GS Group (3.9 billion won (US$3.7 million). Huh Dong-soo, Chairman of GS Caltex, posted a total of 10.1 billion won (US$9.5 million), which included severance pay.
In particular, under criticism were SK Chairman Choi Tae-won (30.1 billion won (US$28.2 million)) Hanwha Chairman Kim Seung-youn (13.1 billion won (US$12.3 million)), CJ Chairman Lee Jae-hyun (4.75 billion won (US$4.5 million)), and Hyosung Chairman Cho Suk-rae (3.95 billion won (US$3.7 million)), all of whom went through trials and investigations last year.
Choi Tae-won, who topped a list of salaries last year that included both company owners and salaried men, received a bonus of 20.7 billion won (US$19.4 million) and a basic annual salary of 9.4 billion won (US$8.8 million) from four affiliated companies within the SK Group. Chairman Kim Seung-youn had a similar case, who also went through a trial and treatment for an ailment. He took home 13.1 billion won (US$12.3 million) from five affiliated companies in the Hanwha Group. CJ Chairman Lee Jae-hyun took home 4.75 billion won (US$4.5 million) last year.
Some annual salaries were not disclosed, such as Korea’s number one businessman Lee Geun-hee, chairman of Samsung Electronics, and Jung Yong-jin, vice chairman of Shinsegae Group, since they are not registered as CEOs and are therefore not mandated to submit their compensation.
Out of 30 domestic groups with owners, 117 compensated their CEOS with over 500 million won (US$469,500), and out of these, 67 companies had their owners as registered CEOs, accounting for a little over half of the total. Quite a few owners stepped down or did not act as a registered CEO to avoid their annual salary disclosures.
For this reason, out of the Samsung family’s current owners/CEOs, only one revealed his salary, who was Lee Bu-jin, the president of Shilla Hotel.
Excluded from the list were Samsung Electronics Vice Chairman Lee Jae-yong, son of Chairman Lee Geun-hee, and Samsung Everland Fashion Business President Lee Seo-hyun, brother of Lee Bu-jin, since they are not registered CEOs.
KOSDAQ-registered SM Entertainment only disclosed the salaries of five professional executives, including Kim Young-min, while Chairman Lee Soo-man did not reveal his, since he is a non-registered CEO.
In business circles, it has been pointed out that the owners excluded from the annual salary disclosure list are in fact receiving hefty CEO-level salaries. Owners also pocket a lion’s share of dividends annually as well, on top of their annual salaries.
In the meantime, the list will get a lot shorter next year, since there will be a lot fewer owner executives, as many are stepping down such as SK Chairman Choi Tae-won, Hanwha Chairman Kim Seung-youn, and CJ Chairman Lee Jae-hyun who are resigning as registered CEOs citing recent police investigations, etc.
A high ranking CEO at one of top 10 groups said, “To my knowledge, a lot of major companies’ owners are considering resigning as registered CEOs.”
The disclosure also met with controversy over the appropriateness of the compensation. For instance, Kumho Petrochemical Corporation Chairman Park Chan-gu received 4.2 billion won (US$3.9 million) last year. However, the company posted a net loss of 49.6 billion won (US$46.6 million) the same year. It seems inappropriate for Chairman Park to receive an annual salary amounting to 70 percent of the total executive pay limit under these circumstances. Company President Kim Sung-chae only received 780 million won (US$732,420), meaning that the Chairman pocketed about 6 times higher salary than the president, even though they are both executives of the same company.
Mando Chairman Jung Mong-won received 2.4 billion won (US$2.25 million) last year, which is over three times the salary of the same company’s president, who only took home some 700 million won (US$662,345).
Moreover, in the business world, there has been concern that the annual salary revelation could ignite anti-corporate emotions and hatred against the rich. Considering the Korean mentality that places a heavy emphasis on egalitarianism, the salary disclosures may spark anti-corporate sentiment.
The politicians cited management transparency when justifying the passage of annual salary disclosure act in April 2013. The political community pushed the bill saying, “There is no reason not to disclose major CEOs’ salaries, seeing that advanced nations such as the U.S. and Europe have been doing it.”
In the U.S., it is compulsory for listed companies worth more than US$700 million to reveal salaries of five CEOs, including the President and Chief Financial Officer (CFO), whether they are registered or not.
Japan mandates the disclosure of salaries of executives, regardless of being registered or not, if the annual pay exceeds 1 billion yen (US$9.7 million) including the executive’s salary, stock options, bonuses, and severance pay.
One executive of the top four group put it, “It is true that people like Lee Geun-hee and Jung Mong-gu contributed a lot of the nation’s industrialization. It seems unreasonable to condemn these people for getting paid a lot of money without recognizing their achievements.”