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Asiana Airlines chief takes responsibility for accounting malpractice
Kumho-Asiana Group Chairman Park Sam-koo resigned from key managerial posts Thursday, holding himself responsible for the recent controversy over an audit report for Asiana Airlines.
Park had bet all on improving the flag carrier's financial structure through a self-rescue plan. Then came the audit report pointing to accounting malpractice and damaging trust in the entire group. He seemed to have no other option but to step down in his last effort to normalize management.
Park's crisis began when Samil PricewaterhouseCoopers, Kumho-Asiana's outside auditor, issued a "qualified opinion" on the airline's 2018 annual report four days ago. It led to the suspension of the trading of Asiana Airline's stocks from Friday to Tuesday. After Park's decision, the auditor upgraded its opinion to "unqualified," and stock trading resumed.
In the process, however, investors' confidence in the smaller of Korea's two full-service carriers all but vanished. In the revised audit report, Asiana's debt jumped from the initial one while operating profits plunged to a one-third level. Hiding liabilities and overstating profits are typical examples of window-dressing.
The pressing circumstances that Chairman Park faced were not incomprehensible altogether. However, it is hardly forgivable if his highly intentional accounting irregularities had confused the market. Aside from putting down all managerial titles, he should take legal responsibility if necessary.
It was, however, fortunate that the outside auditor scrutinized the report and found problems. Otherwise, few could say a massive accounting fraud, like that of Daewoo Shipbuilding & Marine Engineering in 2016, would not have occurred.
Asiana Airline's main creditor, Korea Development Bank, has expressed an intention to help recover the carrier's management if it succeeds in regaining the market's trust. The carrier ought to strive to restore investor confidence with sheer determination. Above all, it should offer a plausible explanation about what happened and seek shareholders' understanding.
Coincidentally or not, Hanjin Group Chairman Cho Yang-ho also lost his CEO title at Korean Air, the nation's first and largest flag carrier, Wednesday, when the company's shareholders voted down his reappointment bid. Other tycoons should learn a lesson from the two cases: Even the owners of major conglomerates can't help but step aside when they make grave managerial mistakes.
