I Became Park Jeong-ui’s Nephew - Chapter 346



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He became Park Jeong-ui’s nephew. – (346)

“Then, I hereby declare that the Public Company Accounting Improvement and Investor Protection Act has been passed by vote.”

This is the United States House of Representatives,

The motion passed with 286 votes in favor and 134 against.

Its contents include the establishment of the Public Company Accounting Oversight Board (PCAOB) and punishment for accounting book errors, and the PCAOB, consisting of five members, is to audit companies’ accounts and ‘recommend’ them to adopt codes of ethics.

What makes this problematic is that it means the Securities and Exchange Commission (SEC) can audit the financial statements of almost any major corporation.

But there is a reason why things have come to this point.

An American CEO created a shell company to hide the company’s insolvency, and an accountant in collusion with the CEO recorded $1.2 billion in false assets on the books each year, inflating the company’s value by $8 billion.

The company was collapsing and the executives didn’t know about it for 7 years.

As soon as this fact became public, the company immediately collapsed.

How can you repay the losses accumulated over 7 years overnight?

In the midst of all this, the CEO who caused the problem further angered public opinion by lying that “the company is not going bankrupt, but is being acquired.”

That’s why the government says it should monitor the accounting books of large corporations.

From this time on, the ‘stock option’ system for executives and shareholders began to decline rapidly.

Stock options are a good system if you only look at the purpose.

Executives receive their wages in cash and stock, and as the company’s stock price grows, the executives naturally become rich.

A good example is Apple CEO Steve Jobs, who became a billionaire by increasing the stock he received as stock options by several billion times. Didn’t that make Apple the best company in the world?

In this respect, stock options have the advantage of stimulating corporate growth and improving the CEO’s work ethic.

If you just sit around and receive a paycheck, you won’t be motivated, so isn’t it better to grow the company and become rich?

But there are not only good examples.

As mentioned above, if the CEO colludes with the accountant to manipulate the company’s books, the stock price will rise, so the CEO will just blow his nose and not do anything.

“Stock options can be a catalyst for managers to focus on profit management rather than efficient operation of the company. To reduce this side effect, appropriate salaries should be paid and incentives should be provided (Jensen and Meckling).”

American scholars Jensen and McLean have already seen through the negative effects of stock options 20 years ago.

The CEO is the head of the company, but isn’t he ultimately in charge of managing other people’s money?

Because of these limitations, CEOs must always be under surveillance, and that surveillance role must be performed by executives.

If you’re an executive, you have to work harder than anyone else. Do you expect one capable CEO to sit down and have that servant make the money for him?

How incompetent and uninterested in the company must you be to leave everything to a professional CEO while the executives just carry on.

Some people are wary of the fact that all corporate power is concentrated in the hands of the chairman of a large corporation, but when we look at this reality, the chairman system may be more transparent.

A CEO is just a servant who takes the money and runs away, but a chairman of a large corporation is the owner of the company, so naturally he or she will have affection and interest in his or her company.

Would the chairman of a large corporation really manipulate the company’s stock price by exercising his stock options and only lining his own pockets?

The problem is that it really could be the case.

There was even a case where a large company with 22,000 employees went bankrupt due to the chairman’s stock price manipulation, and in the end, this was not a problem with the system.

The question is how responsible a person is in running a business.

There are CEOs like Steve Jobs who increase the value of companies that are not their own by tens of times, and there are also CEOs of large corporations who ruin their own companies by manipulating their stock prices.

In the end, what matters is people.

When investing in a company, it is important to first understand who is leading the company, not its performance.

So what kind of people do companies in each country have as managers?

The interest was focused not only in the United States but also in Korea.

***

[From 1992 to 1997, the stock options received by U.S. manufacturing CEOs amounted to 1% of all stocks. In contrast, the stock options received by Korean CEOs amounted to only 0.09% of all stocks.]

This is Korea,

Korean public opinion focused on the differences in management structures between the United States and Korea.

The US gave CEOs stocks to grow their businesses, but now that the economy is in turmoil and a thief has appeared who has embezzled a whopping $8 billion, stock options are no longer the answer.

So, Korean management style started to attract attention.

In Korea, only a very small number of CEOs are granted stock options, and the percentage is less than 1/10 of that in the United States.

The problem is that if this is the case, CEOs will have to be satisfied with their annual salaries. Even if I grow the company, will the CEO work hard if the profits go to major shareholders?

According to that logic, all Korean CEOs are lazy and companies will not grow.

But that was a misunderstanding.

This is something that can be seen just by looking at the profit structure of Korean banks.

The stock option ratio of the Korean bank president is only 0.049%, and the right can be exercised after two years.

For reference, the term of office for a bank president is 4 years.

Doesn’t this mean that the option can be exercised before the term ends?

Stock options are usually exercised at the end of the term, but what would the bank president think if he could exercise them in the middle?

The best way is to somehow increase the value of the bank in the early stages of its term.

That’s why bank presidents increase their collateralized loan ratios early in their tenures.

The problem is that as lending interest rates rise, the gap between deposit and loan interest rates widens. Does this mean that bank presidents are engaging in usury business targeting ordinary people for profit?

You could see it that way,

But as mentioned above, the bank president’s stock option ratio is 0.049%, which is less than 1/20th of the average stock holding of an American CEO.

Even if you increase the collateral loan ratio, it is only enough to take retirement benefits.

Some people point out that bank presidents receive excessive retirement pay, but if you look closely, they actually earn it themselves.

Who can say anything if the bank wants to earn interest on loans?

Did the banks threaten people with knives to get them to take out loans?

Everyone took out a loan because they wanted to, and the bank president is just trying to do his best for the stock options that can be exercised after two years.

Compared to the US, stock options in Korea are just a joke, and this is also the driving force behind banks’ efforts to employ their employees.

It means to work hard and earn a retirement pay before leaving.

In reality, people who get hired as bank presidents resign within three years of their term and get jobs elsewhere or even enter politics.

The bank has relatively little promotion backlog, so does this mean that the bank’s stock option structure is unreasonable?

This logic was applied to other large companies as well.

***

“Director, thank you for your hard work.”

“thank you.”

This is the headquarters of Daehan Transportation.

A businessman announced his retirement while being greeted by his executives.

The main character is Executive Director Jae-ok Park, who got a job at Daehan Transportation at the age of 23 and is now 58 years old.

It’s a bit of a shame to retire now after spending 36 years at the company.

But Director Park Jae-ok made a bold choice.

Even if an old person occupies a position for a long time, it only blocks the path for young people, and he even gave up stock options for the development of the company.

The amount of money that Director Park Jae-ok could receive in stock options was a whopping 4.8 billion won, which is a huge amount considering that the price of one apartment in Gyeongseong is 12 million won.

A choice that makes no sense to anyone,

However, Director Park Jae-ok responded that he did not regret it.

“I am someone who has risen from a mere office worker to a corporate executive position. Shouldn’t I leave something behind for the company that gave me such a big role? I decided to give that money as a bonus to the rank-and-file employees.”

If we set an example like this from above, wouldn’t company employees work for the company with pride?

The development of a company is not determined by its outward performance, but by how it develops its people.

Director Park Jae-ok maintained a responsible attitude until the end.

Thanks to this, favorable public opinion toward Daehan Transportation reached its peak, and praise poured in for showing that the world’s number one company is indeed different.

So, will Director Park Jae-ok, who gave up his stock options, live in poverty?

As it turned out, that wasn’t the case either.

[Former Director Jae-ok Park received an average annual salary of 240 million won over the past 11 years since taking office as a standing director. It has also been confirmed that performance bonuses were paid a total of 26 times. Based on this, former Standing Director Jae-ok Park’s assets are estimated to be around 3.2 billion won.]

It’s literally jaw-dropping, but giving up 4.8 billion isn’t something just anyone can do.

Director Park Jae-ok’s actions, which were truly a donation that could only be made with a heart that cared about the company, drew applause and support from Korean society.

***

“Jae-ok is retiring?”

“Yes, you even gave up stock options.”

“Then we should make him a politician. Try creating a position in the Centrist Party or the Women’s Peace Party.”

“All right.”

This is Geumneung, I heard the news of my cousin’s retirement.

58 years old is an age when people used to be treated as grandmothers, but in modern society, it is the prime working age.

Above all, Jaeok is a talented person recognized by the company for his diligence and sincerity, so it would be a waste for the country to retire him like this.

My political style is to squeeze out the best out of talented people until the very end. Since next year is the general election, I decided to have them run for National Assembly.

The problem was that my cousin had no intention of doing so, and he kept pleading with me to leave him alone.

“Brother, I want to retire now and live comfortably.”

“Who cares? No, run in the next general election.”

“Are you planning to make me work my whole life? I should take a break now.”

“Then what am I? Don’t you think that some people act as enemies because they like you?”

If you think about it, I am also a person who missed the retirement period.

Whether it was running a company or a country, he could have just thrown it all away, exercised his stock options, and enjoyed a comfortable retirement.

But that damn sense of ownership and responsibility is holding me back.

I can’t put down what I have in my hands because of the anxiety about what will happen to the company when I retire and what will happen to this country when I retire.

So, we are scraping together talented people.

It was difficult to let my younger brother, who had proven his abilities through corporate life, go on like this.

“Then, put it down too, oppa.”

“Put it down?”

“Yeah, if old people like us block the way, the young people won’t be able to grow, so you have to make a decent living. You’ve been doing this for 48 years already, oppa. Stop it, you’ve reigned long enough.”

I shut my mouth at the nagging that was irritating my ears.

Would this country and company not run without me?

If that’s true, then it proves that there is no talent in Korea, so it might be right to step down now, as my brother said.

So, isn’t that why you’re raising CEO Lee Yeon-su and Jong-hyung (Park Myeong-ui)?

I thought I would keep this position until the kids grew up, but when I listen to my younger sibling, I sometimes think that I am not doing something in vain.

Maybe it wasn’t a sense of duty that kept me in this position, but my own greed. I had even received life-extending surgery, so I had no intention of denying it.