[Opinion] The Qualifications of a KT CEO Lacking Expertise in Information and Communications

KT plans to hold an extraordinary general meeting of shareholders on the 30th to complete the appointment of new outside directors and amendments to the articles of incorporation. The next CEO will be appointed by next month. The CEO vacancy at KT is already well known. In December last year, former CEO Koo Hyun-mo gave up his reappointment due to opposition from the National Pension Service, and in early March, Yoon Kyung-rim, who was selected by the board, stepped down amid pressure and allegations of breach of trust. Since then, the management vacancy has continued.

KT is a widely held company without a controlling shareholder exercising management rights. The government sold all its shares in May 2002. It has been fully privatized for over 20 years. However, every time the administration changes, KT faces pressure for the CEO to step down and investigations by prosecutors. There is no doubt that KT’s board has been lacking in terms of CEO oversight. A common criticism of companies without a major shareholder is CEO entrenchment. In widely held companies, when the CEO exercises management rights unilaterally without board supervision or checks, criticisms arise about governance where oversight and monitoring functions do not work properly. On the other hand, having a controlling shareholder does not guarantee freedom from problems such as personnel arbitrariness by the dominant shareholder. It is not right for a shareholder with less than 10% of shares to act as if representing all shareholders. Major shareholders do not always share the same interests as all shareholders. For example, major shareholders considering inheritance or gifts may not want the stock price to rise.

In fact, it is difficult to say there is a best model for appointing executives. There is no guaranteed system that always selects the best person. What matters may be the process itself rather than the outcome. Procedural legitimacy, which means adhering to appropriate rules in resolving problems or conflicts, is necessary not because it guarantees the best result but because the process must be acceptable. Selecting people is inherently difficult. In both the U.S. and Korea, the highest leaders are elected through open and transparent processes involving all citizens, but the leaders chosen through these processes have not always been the best.

Any choice can fail. However, at minimum, the process should be at a level that many stakeholders can accept. We insist on democratic procedures because democracy does not always produce the best results. When selecting national leaders, the sovereign people must be able to accept the process, and when selecting corporate executives, the shareholders, who are the owners of the company, must accept the process. Most socially difficult conflicts stem from a lack of procedural legitimacy. This is why a fair and transparent election method is necessary. It is not undesirable for political power to intervene in appointing executives of companies without controlling shareholders because it might appoint incompetent managers. Efforts to incorporate shareholder representation into corporate decision-making structures are necessary. However, using the National Pension Service as a tool of government control over privatized widely held companies does not help improve corporate governance.

As the saying goes, personnel is everything. There is no ideal system that guarantees the best outcome. The process only needs to be fair, transparent, and rational. This applies to all personnel decisions. KT has decided to remove the ICT expertise requirement from the CEO qualifications. It would have been better not to create suspicion and controversy unnecessarily.

Kim Sang-cheol, Economic Columnist

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