Labor union's risky bet
ING Korea reels from extended labor strike
By Kim Jae-won
ING Life Korea, a Korean unit of global insurance giant ING Group, has been faltering due to a prolonged strike. The firm’s union has held a month-long strike after the group announced that it was in talks with KB Financial Group to sell the local operation.
The union said there were no visible results so far from its talks with management over the main issues at stake _ protection of employment after the sale, a collective bargaining agreement and bonuses. “The main priority is, of course, to protect employees. We ask management to guarantee this,” said an official of the union.
As the strike continues, concerns over the company’s corporate value are increasing. “A very limited number of employees are working in the company to keep the firm afloat. Many key businesses have stopped,” said the union official.
Experts say it is inevitable that ING Korea will see a big loss in terms of its corporate value. “How can a company on an all-out strike produce a high-level of productivity? It is hugely damaging to it,” said a Seoul-based financial expert asking not to be named. ING Life representatives were not available for comment.
Some industry watchers criticize the union for being too “greedy” because it seeks a large bonus in exchange for the takeover. “Financial workers already have fat paychecks, but their desire to have more never stops,” said an executive of a commercial lender on condition of anonymity.
Some cite the example of Korea Exchange Bank whose employees enjoyed a big bonus after it was bought by Hana Financial Group earlier this year from U.S.-based private equity company Lone Star Funds. The KEB union was in the hot seat over a so-called merger and acquisition bonus, which it asked Hana to pay to “comfort” KEB employees after the takeover.
But, some say the union is doing what it should because the protection of employment is a basic right for workers. They argue that employees are vulnerable to layoffs and other kinds of restructuring measures after their company is taken over by a rival.
They point out Korea Development Bank failed to buy HSBC’s retail branches in Korea recently because the state-run lender did not guarantee employment of workers at the Korean arm of the British banking heavyweight. The two sides had been in talks on the sale of 11 branches of HSBC Korea, but could not reach an agreement mainly due to labor issues.
Negotiations on the acquisition of ING Life Korea by KB are going smoothly and the two companies are narrowing the gap in terms, the sources said.
"KB Financial suggested through a third party that it would guarantee employment of the unionized workers of ING Life," a source with knowledge of the matter said.
The two companies are still debating price, the sources said. ING Group expects its Korean unit could fetch an estimated 3.5 trillion won ($3.04 billion), about 500 billion won higher than KB Financial's bid, market sources said.
ING Group is trying to gain an upper hand in the price negotiation by attracting other prospective buyers including the Hong Kong-based insurance giant AIA Group into a bidding race, according to market watchers.
A successful takeover of ING Life Korea would enable KB Financial to have an insurance subsidiary that ranks fourth among local insurance companies. Currently, the group has minor industry player KB Life Insurance under its wing.