LH Likely to Reclaim Part of Performance Bonuses Paid to Executives and Employees... 9.96 Million Won Last Year

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[Asia Economy Reporter Kim Eun-byeol] As the government announced that it will review whether to revise the management evaluation of Korea Land and Housing Corporation (LH), the possibility of partially reclaiming performance bonuses already paid to LH executives and employees has increased.

According to government officials on the 23rd, the Ministry of Economy and Finance recently set a policy to examine whether to revise past management evaluation results reflecting the investigation outcomes of speculation allegations involving LH employees. If the evaluation grade is lowered as a result of the revision, the performance bonuses allocated to executives and employees will be reduced accordingly. This is because public enterprise executives and employees receive performance bonuses differentially based on the previous year's institutional management evaluation grade conducted annually.

The grades are divided into six levels: S (Excellent), A (Outstanding), B (Good), C (Average), D (Insufficient), and E (Very Insufficient). LH received an A grade for three consecutive years from 2017 to 2019 in management evaluations. Accordingly, LH executives and employees have recently been able to receive the highest level of performance bonuses among public enterprises each year.

According to the Public Institution Management Information Disclosure System (Alio), based on last year's settlement, the average performance bonus for regular full-time LH employees was 9,962,000 KRW per person. This reflects the 2019 institutional evaluation results and excludes the institution's own performance bonuses or internal evaluation bonuses. For executives, the performance bonus for the institution head was 118,802,000 KRW, and for standing auditors and directors, it was 79,200,000 KRW, among others.

However, if LH's 2019 evaluation grade falls below an A grade, LH executives and employees will have to return the difference in performance bonuses corresponding to the lowered grade. In particular, from the D (Insufficient) grade onwards, they are excluded from receiving management evaluation performance bonuses altogether.

To reclaim performance bonuses, the management evaluation results and related bonuses must first be revised through deliberation and resolution by the Public Institution Operation Committee. After the resolution, the method of reclaiming the bonuses is autonomously determined by the institution, but typically, a withholding method is applied where the reclaimed amount is deducted from future performance bonuses to be received by executives and employees.

However, for employees who have already retired, withholding is impossible, so the reclaimed amount must be separately paid to the institution. If retirees do not voluntarily pay the reclaimed amount, the institution can file a lawsuit to claim the return of unjust enrichment and recover the funds.

Nonetheless, the possibility of full individual performance bonus reclamation is considered low. Public institution management evaluation indicators are divided into quantitative indicators, such as job creation and operating profit margin, which can be arithmetically measured, and other non-quantitative indicators like ethical management and social integration. Since quantitative indicator evaluations are unlikely to be reversed, and performance bonuses are paid separately in three categories?comprehensive, management, and major projects?even if the comprehensive grade falls, some performance bonuses can still be paid. For example, if a public institution receives a D or lower grade in the comprehensive evaluation but a C grade in management, it can still receive performance bonuses for that part.

The government plans to conduct the 2020 management evaluation of LH, to be announced next month, with the strictest standards. In this case, the total amount of performance bonuses for this year, which are not subject to reclamation, is also expected to decrease significantly compared to the previous year.

This content was produced with the assistance of AI translation services.