Performance-Linked 'Public Enterprise Management Evaluation' Framework Changes... Financial Performance Scoring Doubled

Expansion of Financial Performance Management Score from 10 to 20 Points... Selection of Customized Detailed Evaluation Indicators Based on Each Institution's Financial Situation
Renaming Social Value Implementation to Social Responsibility and Reducing Score from 25 to 15 Points
Introduction of 5-Point Innovation Bonus

[Asia Economy Sejong=Reporter Kim Hyewon] The government has finalized detailed plans to double the allocation of points for financial performance in management evaluations linked to performance bonuses for executives and employees of public enterprises and quasi-governmental institutions. The plan aims to award higher management evaluation scores and performance bonuses to public enterprises that improve their financial structure by reducing debt or increasing revenue.

On the 6th, the government held the 13th Public Institution Management Committee meeting chaired by Choi Sang-dae, Vice Minister of Strategy and Finance, to review and approve the "2022 Public Institution Management Evaluation Manual Revision (Draft)." This follows the new government’s public institution innovation guidelines (July) and the public institution management system reform plan (August), specifying the allocation of points for each management evaluation indicator and reflecting the necessary manual revisions.

As announced, the government significantly strengthened the financial performance evaluation. The existing evaluation indicators of work efficiency (5 points) and organization, personnel, and financial management (7 points) were separated into financial performance management (20 points) and organization and human resource management (4 points). Notably, the financial performance score for public enterprises was doubled from 10 to 20 points, with the financial budget performance score sharply increased from 3 to 11 points.

Additionally, customized detailed evaluation indicators were selected according to each institution’s financial situation. Institutions were classified by type considering factors such as debt ratio and self-generated revenue ratio, and weights were differentially applied across three areas?activity, profitability, and stability?according to the characteristics of each type. For public enterprises with large debt and where debt management is critical, the weight for the stability indicator was set higher.

For 14 financially risky institutions, including Korea Electric Power Corporation, power generation subsidiaries, and resource public enterprises, new indicators were introduced to assess the appropriateness and implementation efforts of financial soundness plans. Within the financial performance management category, a new indicator for general administrative expense management was created to promote reductions in general administrative expenses incurred by institutions beyond project costs.

The social value implementation category was renamed to social responsibility and its allocation reduced from 25 to 15 points. The job creation (6 points) and equal opportunity and social integration (4 points) indicators were merged into a job and equal opportunity indicator, with the allocation adjusted from 10 to 5 points. The safety (4 points) and environment (1 point) indicators were separated into safety and disaster management (2 points) and eco-friendly and carbon neutrality (1.5 points) indicators, while the ethics management indicator allocation was lowered from 5 to 2.5 points. Conversely, the eco-friendly and carbon neutrality indicator was expanded to 1.5 points, reflecting the growing importance of environmental factors in ESG (Environmental, Social, and Governance) management despite its previously lower weight compared to other indicators.

The bonus system outside the 100-point scale emphasized "innovation." Institutions receive a 5-point bonus based on the results of their innovation plans. The previous 3-point bonus for COVID-19 response efforts and achievements was abolished.

Furthermore, to promote the introduction of job-based pay, the allocation for the job-based pay evaluation indicator within the salary and welfare category was increased from 2 to 2.5 points, while the allocation for management disclosure inspection results within the public communication indicator was reduced from 1 to 0.5 points, reflecting the high quality and satisfaction of management disclosures by public enterprises. Related regulations restricting performance bonuses for institutions with high financial risks such as net losses were revised to allow restrictions through Public Institution Management Committee resolutions.

According to the management evaluation manual revision decided on this day, the public enterprise and quasi-governmental institution management evaluation team will assess the 2022 performance in the first half of next year. The final evaluation results will be confirmed at the Public Institution Management Committee meeting in June next year.

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