Inspection of Performance Fee Payments for Real Estate PF by 17 Companies
The Financial Supervisory Service (FSS) has tentatively concluded that some companies violated the performance-based compensation payment standards stipulated in the Corporate Governance Act after reviewing the real estate project financing (PF) performance compensation systems in the securities industry.
On the 30th, the FSS announced that it found illegalities after inspecting the real estate PF performance compensation payment practices of 17 securities firms.
The FSS launched the crackdown because short-term performance orientation in the securities industry was pointed out as one of the causes of the recent concentration of high risks, such as real estate PF defaults.
Earlier, in the first half of last year, the FSS inspected the real estate PF performance compensation payment practices of 22 securities firms subject to the Corporate Governance Act and identified 17 firms with inadequate performance compensation systems. From November 13 to 24 last year, it conducted a document inspection to verify compliance with the Corporate Governance Act for these companies.
The inspection results tentatively confirmed that a significant number of securities firms violated the Corporate Governance Act regulations in the process of paying real estate PF-related performance compensation. In the case of certain securities firms, the performance compensation payment standards set by the compensation committee did not comply with the standards prescribed by the Corporate Governance Act.
Some securities firms paid performance compensation that should have been deferred all at once or failed to comply with the minimum deferral period (3 years) and minimum deferral ratio (40%). Unreasonable payment practices that did not sufficiently reflect the investment performance and risk duration of the responsible tasks were also identified.
The FSS stated, "We will take strict measures against the violations confirmed in the inspection results to encourage linking the performance compensation system to long-term performance," and added, "We will actively promote institutional improvements in consultation with related organizations to ensure that deferral, clawback, and disclosure of performance compensation under the Corporate Governance Act operate effectively."
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