Current Legal Status and Improvement Measures for the governance of national public enterprises in the form of stock companies

The governance structure of public enterprises, characterized by a dual principal-agent relationship between the public, the government (civil servants), and management, is designed to minimize these complex agency problems while ensuring a balance between public interest and corporate efficiency in management. This paper focuses on the governance of public enterprises structured as corporations, analyzing the current legal framework and proposing improvements. Above all, it suggests reforming the centralized process for appointing public enterprise executives by moving toward a decentralized structure tailored to individual enterprises. This includes diversifying the composition of executive nomination committees and strengthening their functions. It also calls for recognizing labor directors as eligible members of nomination committees and ensuring the inclusion of representatives who can mediate cooperation with local communities. To further enhance the independence and fairness of nominations, the introduction of a random selection system in committee formation is proposed. Additionally, staggering the terms of executives to improve continuity in management is also recommended. Advancing the corporate structure of public enterprises by listing them on stock exchanges would diversify governance through the participation of institutional and minority shareholders. Listed public enterprises, being the most business-oriented type of public enterprise, require mechanisms that strengthen managerial rationality and autonomy to protect corporate and shareholder value. While current corporate laws apply similar provisions to those of private listed companies, there is a growing need for the Public Institutions Operation Act to recognize listed public enterprises and introduce specific regulations that reflect their public enterprise nature.