The chairman of debt-ridden Tongyang Group and his wife took remuneration of $4.3 million as their empire was tanking

Tongyang boss earned $3.2 million

Hyun told Assembly last month that all his money was in firm

BY KIM JUNG-YOON [kjy@joongang.co.kr]

Dec 02,2013

The chairman of debt-ridden Tongyang Group, Hyun Jae-hyun, and his wife, Vice Chairwoman Lee Hye-kyung, took remuneration of 4.5 billion won ($4.3 million) as their empire was tanking, leading to losses for around 50,000 investors. From January through September, Hyun took more than 3.45 billion won in wages and bonuses from Tongyang Incorporated and Tongyang Networks, according to the Korea Exchange, and Lee took 1.08 billion won of compensation from Tongyang Incorporated.
The Tongyang Group debacle surfaced in late September when the conglomerate failed to secure enough liquidity to pay back its due debts and filed for court receivership for five affiliates.The move left almost 50,000 individuals, who invested in the corporate bonds and commercial paper of Tongyang Group affiliates through Tongyang Securities, at risk of losing a total of more than 2 trillion won.?
The brokerage firm sold investments to retail investors without providing sufficient information about the risks involved in the high-interest bonds, and some malpractice is known to have taken place in the sales process.
The Korea Exchange also unveiled the amounts of annual salaries of executive directors. Companies listed on the local stock market must disclose remuneration of executive directors whose annual salaries exceed 500 million won from Nov. 29.
Vice Chairwoman Lee has been criticized for secretly withdrawing 600 million won in cash from the accounts of Tongyang Securities and taking valuables from a safe deposit box.
When compared to the 32 million won average annual salary of Tongyang Group employees, Hyun’s salary was 100 times higher.
Nevertheless, Hyun testified at the National Assembly on Nov. 18 that he had little wealth.
“It is a very difficult situation as I have put all my property in the management of the company that is now in court receivership,” Hyun said.
Meanwhile, another employee of Tongyang Securities committed suicide last Friday, leaving a note saying his clients’ losses made him feel guilty. The employee of the company’s Incheon branch was found dead in his car.
On Oct. 2, a 42-year-old employee at the company’s Jeju branch committed suicide for the same reason.
The police are investigating the employee’s family’s assertion that he was being sued by his former clients.
On an Internet bulletin board run by investors in Tongyang subsidiaries, people expressed sympathy for the suicide victim and instructed other Tongyang Group employees to not commit suicide but to blow the whistle on their company.
In other compensation news, Taeyoung Engineering and Construction CEO and Vice Chairman Yoon Suk-min earned 525.6 million won this year, a Seoul City Gas chairman took home 544 million won, Visang Education President Yang Tae-hoe made 613 million won and a P&Tel (People and Telecommunication) CEO received 562.5 million won in salary, according to the Korea Exchange.
According to the Korean conglomerate research firm Chaebul.com, among the 219 companies that paid executive directors more than 500 million won in annual salary last year has shrunk to 123 as of September this year.
Lower pay was particularly noticeable among families or executive directors of conglomerates, Chaebul.com said.

2013-12-01 17:15

Troubled Tongyang boss hides fat paycheck

By Kim Tae-jong
Major conglomerates have slashed their executives’ annual salary this year in an apparent bid to circumvent tightened rules on the pay of top employees.
From next year, firms must disclose annual income of executives who attend a board meeting. There are two types of executives in Korea — those who can attend a board meeting and those who can’t.
According to Chaebul.com, 123 firms out of 219 which paid their executives annual salaries of 500 million won or more last year showed a drastic decrease in payments in the first nine months of the year.
This contrasts with conventional practices in which chaebol pays very high salaries to their executives, one of the widely cited examples of the economy’s moral hazard.
For example, Tongyang Group Chairman Hyun Jae-hyun received a total of 3.45 billion won in the first nine months of this year from the group’s three affiliates even as the group requested court receivership.
His wife Lee Hye-gyeong, who served as the group’s vice chairwoman, received 1 billion won during the same period.
The chairman is also under investigation for having allegedly issued bonds and corporate papers to unsuspecting individual investors, causing them huge financial losses.
Of the surveyed firms, 20 halved executives’ salaries this year with 45 companies reducing them by over 30 percent and 45 companies cutting them by 10 percent, compared to the same period last year.
The deduction rates are especially high for executives who are members of chaebol owner families.
The average annual salary of executives at Amore Pacific stood at 1.82 billion won last year with 1.44 billion won paid in the first nine months, but it dropped to 410 million won in the January-September period this year.
At Hankook Tire Worldwide, the  salary was 1.95 billion won last year with about 1.33 billion won paid in the first nine months but it plunged to 393 million won in the same period this year.
SK Telecom and CJ Cheil Jedang, which paid their executives over 3 billion won in annual salaries, have reduced the payroll of executives by 60 percent, while NHN and NCsoft, which paid over 2 billion won to executives, cut it by 50 percent.
The reduction rates of LG Household and Healthcare, SK Networks, GS Engineering and Construction also stood at over 50 percent.
Only a few firms showed an increase in annual salaries to executives with Samsung Electronics recording an 11.9 percent increase and Hyundai Motor with a 9.7 percent hike in the first nine months this year.
Chaebul.com said that such high decreases are “abnormal” even given the current economic conditions.
“These salary reduction rates are abnormally high,” an official from the firm said. “This is obviously an effort to reduce executives’ annual salaries below 500 million won to avoid the new regulation.”
The Financial Services Commission (FSC) last month announced that listed firms must disclose the total amount of the annual salary they pay to each executive in regulatory filings and their financial reports, if their annual income topped 500 million won.
The amended rule went into effect on Nov. 29 this year but will be actually implemented in March next year, given that most of the firms close their books in December. About 2,050 businesses, including 1,663 listed firms, are expected to be subject to the revised rule.
The new measures are part of effort to beef up transparency in the corporate pay system amid growing criticism that conglomerates have paid their executives extremely high salaries despite poor performances of corporations.