A female customer checks luxury brand bags displayed at a department store in Seoul. Foreign luxury goods makers are coming under increasing pressure to conduct more goodwill activities here and refrain from paying dividends to parent firms overseas. / Korea Times file

By Lee Hyo-sik

Louis Vuitton, Gucci and other foreign luxury goods makers rake in hundreds of millions of dollars in profits each year by capitalizing on Korean consumers’ love affair with high-end bags, watches, clothes and other items.

But they send the lion’s share of their earnings back to headquarters based mostly in Europe and are reluctant to make investments here and hire jobseekers. Even worse, they are extremely stingy about making social contributions, drawing strong criticism from civic groups.

Civic activists argue that foreign luxury brands should increase donations here as they generate enormous profits from selling goods to local consumers. They also say the luxury brands need to refrain from paying huge dividends to their parent companies overseas.

According to audits released by the Financial Supervisory Service (FSS), five foreign luxury markers doing business in Korea spent mere 0.3 percent of their profits on average in 2011 to conduct corporate social responsibility (CSR) activities, substantially lower than the average 1.83 percent among local firms.

In particular, French cosmetics firm Sisley and Italian jewelry maker Bvlgari did not spend a penny last year to help improve the livelihoods of the unfortunate here, despite their record-high profits.

``It is a common sense that if a company earns money, then it has corporate responsibility to spend a certain portion of earnings for local communities,’’ said Kim Han-ki, secretary general of economic policy division at the Citizens Coalition for Economic Justice.

``It is encouraging that Korean businesses have been expanding CSR activities over the years to help orphans, the elderly and other vulnerable groups. In contrast, foreign luxury goods makers have remained largely indifferent to such corporate responsibility,’’ Kim said.

The secretary general then urged luxury brands to boost their social contributions here to fulfill their responsibility and improve their public image.

Stingy on corporate giving

Louis Vuitton Korea earned 44.8 billion won ($39.6 million) in net profits in 2011, up 12 percent from a year earlier. The company donated 211 million won, accounting for only 0.44 percent of its annual net earnings.

``We have continued to expand our CSR programs for orphans and other marginalized children here over the years,’’ said a spokeswoman for the French luxury goods maker. ``We plan to spend more money this year than previous years to help the socially vulnerable and improve our public image.’’

Meanwhile, Gucci Korea donated 56.5 million won last year, up from 37.3 million won in 2011. But it accounts for only 0.02 percent of its 23.6 billion won net profits, which more than doubled its 2010 figure of 11.5 billion won.

``In line with headquarters’ policies, we are now considering a range of long-term social contribution programs,’’ Gucci Korea official said. ``We will soon announce what programs we are going to implement. We highly value Korean customers and are doing our best to become a responsible corporate member here.’’

In 2011, Ferragamo Korea made a net profit of 16.3 billion won, up from 11.3 billion won. But the Italian luxury goods maker spent only 30 million won for CSR activities, accounting for 0.002 percent of its net earnings.

Bvlgari Korea and Sisley Korea, which made 7.5 billion won and 4.8 billion won in net earnings last year, respectively, were found to have not made any donations.

Foreign luxury goods companies have been eager to send money they earn here back to their headquarters.

For instance, the FSS audit reports showed Sisley Korea earmarked 4.5 billion won of its 4.8 billion won in net profits in 2011 as dividends and transferred the amount to the French headquarters.

From 2007 and 2011, the Korean unit of the French firm sent 29.5 billion won overseas as dividends, 95 percent of 32.3 billion won net profits it generated over the five-year-period.