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The Timing of Korea Racing Authority’s Reorganization… Whispers of Reappointment for Chairman Chung Ki-hwan

[비즈한국] The Korea Racing Authority (KRA) recently underwent an organizational restructuring, which included the creation of an ESG Management Department. This move has sparked speculation that the reorganization was carried out with President Lee Jae-myung in mind. Organizational restructuring is typically performed when a new head of an institution takes office, but Chairman Chung Ki-hwan’s term already expired in February. However, due to political turbulence, including the emergency martial law and the early presidential election, the process for selecting the next KRA chairman has been delayed, leaving Chairman Chung to continue in his role. Some are cautiously suggesting the possibility of Chairman Chung’s reappointment. There is also analysis that the reorganization was a move made with reappointment in mind. However, the KRA maintains that the reorganization and the rumors of Chairman Chung's reappointment are unrelated.

The KRA recently carried out an organizational restructuring. The main content of the reform plan was to spin off the ESG-related duties from the Management Support Department to establish a new ESG Management Department. Additionally, a Horse Racing Planning Department was newly created, the existing Horse Racing Management Department was renamed the Horse Racing Operations Department, and the Business Management Department was changed to the Business Operations Department.

The most notable part of this is the creation of the ESG Management Department. It is true that the KRA has been carrying out ESG-related activities for several years. However, the decision to establish a new department for it has led to gossip that it was done with President Lee Jae-myung in mind. President Lee has expressed high interest in ESG, to the extent that he pledged to make ESG disclosure mandatory for listed companies with assets of 2 trillion won or more. The minutes of the KRA Board of Directors meeting also state the reason for the reorganization as 'responding to the changed management environment, such as the launch of a new administration, strengthening organizational capabilities for pending issues, and creating sustainable performance.'

The KRA is currently led by Chairman Chung Ki-hwan. Chairman Chung’s term officially expired in February of this year. While the KRA began the process of selecting the next chairman in February, the work was halted following the impeachment of former President Yoon Suk-yeol. It appears that the selection process will resume after the cabinet appointments for the Lee Jae-myung administration are finalized to some extent. The KRA chairman is appointed by the President upon the recommendation of the Minister of Agriculture, Food and Rural Affairs, following a recommendation by the Executive Recommendation Committee and the deliberation and resolution of the Public Institution Operation Committee.

Some are suggesting that Chairman Chung Ki-hwan initiated the reorganization with an eye toward reappointment under the new administration. Typically, organizational restructuring occurs at the end or beginning of the year, or when a new head is appointed. This is why many are evaluating it as unusual for Chairman Chung, whose term has expired, to push through an organizational change.

The KRA stated that the rumors of Chairman Chung's reappointment are unrelated to the organizational restructuring. A KRA official said, "It is a trend to reorganize the organization once or twice a year," adding, "There have been continuous demands to separate relevant organizations, so it was difficult to postpone it any further."

Regardless of the stance of the KRA or Chairman Chung, the possibility of reappointment continues to be mentioned. Chairman Chung Ki-hwan was appointed KRA chairman during the Moon Jae-in administration, not the Yoon Suk-yeol administration. During the Moon administration, Chairman Chung served as a policy planning committee member for the Presidential Committee on Policy Planning and was appointed KRA chairman in February 2022, toward the very end of that administration. For this reason, he faced criticism from some in the People Power Party as an 'entrenched appointee.'

However, there are also significant predictions that reappointment will be difficult. This is because the KRA's performance has not been remarkable since Chairman Chung took office. The KRA recorded sales of 1.1018 trillion won in 2020 and 1.0614 trillion won in 2021. However, since Chairman Chung took office, sales have failed to reach previous levels: 725.3 billion won in 2022, 766.8 billion won in 2023, and 756.7 billion won in 2024. Nevertheless, the agency did succeed in turning a profit in 2022, compared to operating losses of 406.4 billion won and 417.9 billion won in 2020 and 2021, respectively. It recorded operating profits of 78.5 billion won in 2022, 75 billion won in 2023, and 45.9 billion won in 2024.

The KRA explains that the deficits in 2020-2021 were caused by COVID-19. However, it is difficult for Chairman Chung Ki-hwan to receive high marks considering that sales dropped sharply after the pandemic ended.

President Lee Jae-myung is emphasizing pragmatic appointments. Minister Song Mi-ryung of the Ministry of Agriculture, Food and Rural Affairs, the governing ministry, also mentioned at the plenary session of the Agriculture, Food, Rural Affairs, Oceans and Fisheries Committee in April that "without expertise, one can never be appointed (as KRA chairman)," and added, "We will only recommend those with expertise." If Chairman Chung Ki-hwan fails to demonstrate the potential for performance improvement, it is expected that his reappointment will not be easy.