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System failure

July 19,2018
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Cho Yang-ho, chairman of Korean Air, arrives at the Seoul Southern District Court on July 5 for his arrest warrant hearing. The executive faces allegations of tax evasion, breach of trust and embezzlement. [YONHAP]
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Kim Hyun-ki
The author is the Washington bureau chief of the JoongAng Ilbo.

I recently had an irritating experience on a United flight. I arrived at Dulles Airport early and checked into my flight to Boston at an automated kiosk. A message on the monitor said the flight was canceled. I went to the check-in counter, where the representative told me the flight was not leaving because of a problem with the crew.

Then the arguments ensued. I insisted the flight was confirmed the previous evening. The United representative said the cancellation was just made. I demanded an alternative but was given the choice between a layover in Cleveland or leaving the next day.

I stuck around for about 20 minutes. The representative eventually said the cancellation was revoked. That was all, no apology or explanation about what happened. Korean Air, Asiana and United are not very different. They all treat their customers with little care, and their follow-up measures are insignificant.

In April 2017, United randomly selected four passengers who were already seated and demanded they leave because they needed seats for their employees. A doctor who refused to get off because he had appointments with patients the next day was dragged out. His nose and two front teeth were broken. The United CEO’s first response was an internal e-mail that gave an apology but blamed the passenger. It was no different from how Asiana and Korean Air handled their issues.

Then, United’s stock price plummeted. Shareholders made a fuss. The CEO delivered another apology. “The truly horrific event that occurred on this flight has elicited many responses from all of us: outrage, anger, disappointment,” Oscar Munoz said. “I share all of those sentiments, and one above all: my deepest apologies for what happened. I want you to know that we take full responsibility and we will work to make it right. It’s never too late to do the right thing.”

It was rather late, but it worked. The board of directors withdrew their plan to name the CEO as chairman. His salary was cut in half. United hired an executive from rival American Airlines to be president. How was this all possible? Because the company had a professional management system where a board of directors intensely watched and criticized the operation.

The owner family of Korean Air is so corrupt that its members never apologize. Asiana’s old-fashioned owner appointed his daughter, who has no experience as a company executive, to the position of vice president at a hospitality subsidiary and asked people to “treat her nicely” at a news conference while apologizing for the airline’s “no meal” fiasco. Executives try to please the owners and only hope for storms to pass, while unqualified heirs automatically take top positions. Under such an outdated management system, not only Korean companies but Korea itself will no longer be able to remain in the OECD for very long.

We are tired of reading disgraceful news about shameless owners. Warren Buffett famously said that it was like “choosing the 2020 Olympic team by picking the eldest sons of the gold-medal winners in the 2000 Olympics.” Such nepotistic management originates from Japan, but 30 years have passed since Japanese companies ended their family-dominated system.

Two former presidents are in jail, and prosecutors are revisiting the sexual abuse and suicide of actress Jang Ja-yeon. The Defense Security Command is under investigation for allegedly drafting a contingency plan for martial law in case the Constitutional Court ruled against President Park Geun-hye’s impeachment. These acts, though, are simply revenge against a previous administration and don’t get at the essence of the problem.

What we need to do is end our backward social and economic system. While our management rating is the lowest among OECD countries, our minimum wage is set to be the third highest. Such a mismatch is rather strange.

JoongAng Ilbo, July 18, Page 30