Amid the Cuts to 109 Public Institutions, Nearly 100 Top Executive Roles to Disappear: "A Wave of Departing Heads Expected"

Heads Expected to Step Down in Succession Due to New Integrations and Absorption Mergers

External Open Recruitment Likely for Five Power Generation Companies and Port Authorities

Restructuring Anticipated for Institution Heads Appointed During the Yoon Administration

As the government sets the stage for restructuring by reducing the number of public institutions to 109, the future of the heads of public institutions targeted for consolidation and abolition is expected to be mixed. When organizations merge into one, there is physically only one position left as the supreme head, which means that nearly 100 top executive roles at consolidated or dissolved institutions are expected to disappear. As a result, a stream of heads who are unable to complete their statutory three-year terms will be packing up, and a variety of scenarios are likely to unfold, including forced dismissals, voluntary resignations, and demotions to lower ranks.

Prime Minister Han Seong-sook is holding a press conference on the relocation of the Ministry of Justice and the Ministry of Gender Equality and Family, as well as the reform of public institution functions, at the Government Complex Seoul in Jongno-gu, Seoul, on the 3rd. Yonhap News Agency.

According to relevant ministries on September 4, the consolidation and merger of public institutions will proceed in several ways: the liquidation of existing institutions followed by the establishment of a completely new entity; absorption-type mergers where one institution subsumes another; the reorganization of subsidiaries and consolidation of small-scale organizations; abolition of institutions; and the separation of functions. Although the procedures may differ, the common outcome is a reduction in the overall number of top executive positions. A former public institution head commented that, "There will be a spate of voluntary resignations before the consolidations are completed," adding, "Many of the heads appointed during President Yoon Suk Yeol’s administration, who have tried to endure until the end of their term, are likely to step down under the pressure of restructuring." This mirrors what happened in 2022 when Daegu City carried out public sector restructuring, resulting in a wave of resignations among institution heads—a scenario that could now play out nationwide.

In New Integrations, ‘Positions Extinguished with Corporate Liquidation’... Open Recruitment Likely

In cases where a completely new entity is created or similar functions are unified, the original corporations are dissolved simultaneously, causing the legal status and remaining terms of the affected heads to be automatically terminated. This follows a natural retirement process. For example, when Korea National Housing Corporation and Korea Land Corporation merged to form Korea Land & Housing Corporation (LH) in the past, both existing corporations were liquidated, leading to the departure of their respective heads, and the government appointed an external candidate as the inaugural president through open recruitment. At the time, both heads of the former organizations vied in the open recruitment process but ultimately failed to make the cut.

Similarly, in mergers where organizations of comparable size or three or more institutions are consolidated at once, it is likely that all existing heads will be required to step down to facilitate a smooth integration, after which an open recruitment will announce for an external candidate. Among the current government’s targets for consolidation, the five regional power generation companies—Namdong, Jungbu, Seobu, Nambu, and Dongseo Power—as well as four port authorities, stand out as representative candidates. These organizations are expected to replace all existing heads with new leadership through competitive open recruitment after the merger.

In ‘Absorption Mergers,’ Only the Head of the Absorbed Institution Is Dismissed... Subsidiaries and Small-Scale Organizations Will Also See Fewer ‘One-Head’ Structures

In contrast, in mergers involving organizations of clearly different sizes, known as absorption-type mergers, only the head of the absorbed institution loses their post. The head of the surviving institution retains their position, while the head of the absorbed corporation loses their role with the organization's liquidation. The integration between Korea Railroad Corporation (KORAIL) and SR Corporation is a classic example: as KORAIL, the much larger entity, restructured operations to center around itself, the term of the SR CEO naturally ended. There has been discussion of offering the outgoing SR head a division director role within KORAIL to facilitate stability, but this is a discretionary gesture, not a legal obligation.

The rationalization of subsidiaries and consolidation of small-scale institutions, which make up most of those subject to restructuring, also foreshadows a series of top executive departures. In the case of Korea Job World absorbing its own subsidiaries in a vertical integration, as well as the integration of seven policy finance subsidiaries under Korea Asset Management Corporation and Korea Development Bank or the merger of five port subsidiaries, most heads of existing subsidiaries will lose their posts, and a single unified CEO will be appointed. Likewise, the combination of small organizations with fewer than 100 employees, such as the Center for Food Safety and the Food Safety Information Agency, will lead directly to a reduction in head positions.

Additionally, in cases like the Korea Coal Corporation, where the institution is slated for early dissolution, the head position will be entirely eliminated as the entity’s functions end. On the contrary, in function-splitting restructurings, such as with Korea Land & Housing Corporation being divided into Housing & Urban Development Corporation and Housing & Urban Asset Corporation, there will be exceptional cases in which new head positions are actually created. A Ministry of Economy and Finance official said, "There are no separate guidelines concerning the fate of institution heads, nor could there be in principle." The individual explained, "Discussions will take place on a case-by-case basis, depending on the circumstances of each institution and supervisory ministry."

This content was produced with the assistance of AI translation services.