Public Enterprise Management Evaluation Indicators Down 30%... Only Overall Grade Reflected in Performance Bonus Calculation

Approval of Next Year's Public Institution Management Evaluation Manual
Evaluation Differentiated by Detailed Institution Classification

The Korea Land and Housing Corporation (LH), which caused a nationwide uproar by bringing the issue of moral hazard in public institutions to the surface due to the land speculation scandal involving executives and employees. (Image source=Yonhap News)

[Sejong=Asia Economy Reporter Moon Chaeseok] Next year, the public institution management evaluation indicators will be reduced by up to 41% depending on the institution. Performance bonuses for management evaluations will be calculated based solely on the overall grade, eliminating separate calculations for individual categories. This means that even if an institution performs well in individual areas, no performance bonus will be given if the overall grade is unsatisfactory.

On the 29th, the Ministry of Economy and Finance held the 17th Public Institution Management Committee meeting chaired by Second Vice Minister Ando Geol, where they deliberated and approved the "2022 Public Institution Management Evaluation Manual" containing these details.

The government plans to consolidate and streamline similar or overlapping evaluation indicators, significantly reducing the number of indicators next year. For public enterprises, the number of evaluation indicators will be reduced from 81 this year to 57, a 29.6% decrease. Quasi-governmental institutions will see a reduction from 73-79 indicators to 50-55, about a 31% cut. For 24 small and medium-sized institutions with fewer than 200 employees, additional reductions will be made by excluding management indicators, cutting the number from 73 this year to 43, a 41.1% decrease.

In response to criticisms that external evaluations and management evaluations overlap, six external evaluations with sufficient objectivity, reliability, and consistency will be quantified and directly reflected in the management evaluation. Considering concerns about ranking issues caused by the current relative evaluation system, from next year, the government will separately evaluate and disclose each institution's "performance improvement" alongside the existing comprehensive evaluation.

When calculating performance bonuses, the government also plans to additionally reflect each institution's management performance improvement. The method of calculating bonuses by category (comprehensive, management, major projects) will be abolished, and bonuses will be calculated based solely on the overall grade. Institutions receiving a comprehensive grade of D or E, which corresponds to "unsatisfactory or below," will not receive performance bonuses even if they achieve a C grade or higher in categories such as management. For example, the Korea Land and Housing Corporation (LH), which caused social controversy due to employee land speculation, received a D grade in the comprehensive evaluation this year but a C grade in management, which had opened the door for performance bonuses. The government plans to completely block such cases.

The government plans to further subdivide and apply differentiated evaluation methods based on the nature and size of each institution's work, beyond the current classification of public enterprises, quasi-governmental institutions, and small and medium-sized institutions. Public enterprises will be classified into "Social Overhead Capital (SOC), Energy, Industrial Promotion," while quasi-governmental institutions will be divided into "Fund Management, SOC & Safety, Industrial Promotion, Public Welfare Enhancement." Small and medium-sized institutions will be categorized into medium-sized (200-300 employees) and small-sized (fewer than 200 employees).

The current evaluation method, which allows institutions to autonomously select 1-2 financial indicators, will be changed to set 3-4 customized financial indicators objectively through professional review of each institution's financial scale and situation. Public hospitals such as Veterans Hospitals (Veterans Welfare Medical Corporation) and Industrial Accident Medical Centers (Workers' Welfare Corporation) will be granted exceptions in management evaluations for increased allowances due to COVID-19 response. For example, when overtime and special allowances increased during the COVID-19 response, the increase in related allowances will be excluded from the total labor cost management indicator evaluation.

The government plans to finalize and announce the evaluation results by June 20th after procedures including preliminary evaluation in February, document evaluation in March, on-site inspection in April, verification from May to June, and deliberation and resolution by the Public Institution Management Committee. Starting next year, the evaluation team will begin operations one month earlier than usual, and an evaluation verification team will be newly established within the evaluation team to enhance accuracy.

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