Following KEPCO, Dongseo and Nambu Power Also Return Performance Bonuses... Jungbu and KHNP Under Review

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[Asia Economy Sejong=Reporter Dongwoo Lee] Korea Electric Power Corporation (KEPCO) and its affiliated public power generation subsidiaries are participating in the voluntary return of performance bonuses to overcome management difficulties. This signifies that the management of each power generation subsidiary will share responsibility to resolve the financial crisis of the power group and minimize electricity rate increases. However, some argue that recommending voluntary return of performance bonuses for public enterprises with good evaluation grades contradicts the original purpose of management evaluation.

According to the Ministry of Trade, Industry and Energy and the power industry on the 22nd, East-West Power decided on the voluntary return of performance bonuses based on the results of the '2021 Public Institution Management Evaluation.' The return targets include President Kim Young-moon and executives and managers at grade 1 or higher. East-West Power has currently been notified by the Ministry of Economy and Finance of the performance bonus payment ratio. Previously, the company was the only public institution to receive an S (Excellent) grade in last year's public institution management evaluation.

An East-West Power official said, "The proportion of performance bonus returns is expected to be similar in scale to KEPCO, with 100% for executives and about 50% for managers at grade 1 or higher."

The reason East-West Power decided to return performance bonuses is to jointly overcome the financial crisis of the power group, including KEPCO. KEPCO recorded a deficit of 7.8 trillion won in the first quarter of this year, the largest since its founding, due to soaring fuel costs, and has entered an emergency management system, preparing self-help measures worth about 6 trillion won.

Before East-West Power, KEPCO and South Power also decided to return performance bonuses. KEPCO President Jung Seung-il and executives will return 100% of their bonuses, and 440 key managers at grade 1 or higher will return 50%. KEPCO stated, "This decision was made considering the worst operating deficit of over 20 trillion won expected this year due to the global energy price surge." South Power's management also joined the return, planning to reduce cost budgets by over 100 billion won and optimize investment costs of more than 150 billion won in power generation facilities this year to improve financial structure.

Jungbu Power and Korea Hydro & Nuclear Power (KHNP) are also reviewing the return of performance bonuses. Jungbu Power is strongly considering a plan for executives to return 100% of their bonuses and is discussing the return proportion for managers at grade 1 or higher. KHNP has not yet decided on the specific return but is expected to determine the return and proportion through internal discussions in line with the trend among power generation companies.

However, some argue that the government's recommendation for voluntary return of performance bonuses by public power companies contradicts the purpose of management evaluation. Since the proportion of performance bonuses is paid differentially according to management evaluation results, it is inappropriate for companies with high grades to participate in returns citing responsibility for KEPCO's deteriorating management. Last year, East-West, South-East, South Power, and KHNP received S to A grades in management performance evaluation, so executives should also receive the rightful rewards for their efforts.

Regarding this, Hong Doo-seon, Director of the Public Policy Bureau at the Ministry of Economy and Finance, explained, "Employees' performance bonuses are recognized according to management evaluation, but voluntary return is recommended for executives as a matter of management responsibility. In the current complex economic crisis, it was pointed out at the Public Institution Management Committee that public institutions, especially executives, should play a more active role."