Park Jae-hyuk is a seasoned journalist who has provided comprehensive coverage of South Korea's corporate dynamics, economic policies, industry challenges and the global positioning of Korean companies. Based on the articles he has written since joining The Korea Times in 2016, his investigative approach has helped readers understand corporate governance, economic trends and business strategies shaping South Korea’s economy.
Lotte Chemical's hefty bonus irks shareholders
Lotte Chemical's plant in Seosan, South Chungcheong Province / Courtesy of Lotte Chemical
By Park Jae-hyuk
NCC's spun-off workers to receive compensation equal to 500% of base wage
Lotte Chemical is facing shareholder backlash over its plan to reward employees at its naphtha cracking center (NCC) in Seosan, South Chungcheong Province, with their transfer to a new company created under the government-led restructuring of the domestic petrochemical industry.
Citing the petrochemical firm’s mounting losses, minority shareholders questioned whether the company can afford the additional labor costs.
According to industry officials Monday, Lotte Chemical recently notified NCC workers of a planned special bonus equivalent to 500 percent of their monthly base wages, and pledged job security to reassure and motivate them.
The workers are scheduled to move to a company spun off from Lotte Chemical by June 1, and then transfer again to a joint venture between Lotte Chemical and HD Hyundai Oilbank by Sept. 1.
As part of efforts to deal with the oversupply of petrochemical products, Lotte Chemical agreed last November to transfer its Seosan NCC to its joint venture with HD Hyundai Oilbank and raise its stake in the venture. Unlike HD Hyundai Oilbank employees who will return to their firm after a temporary dispatch, Lotte Chemical workers will remain with the new company.
Lotte Chemical is reportedly planning to pay each affected employee a bonus equal to their monthly base wage before September and continue paying the same amount annually over the next four years to discourage them from leaving the joint venture.
In response, shareholders argued that such a large payout is unreasonable, noting the firm has accumulated losses totaling 3 trillion won ($2 billion). They also pointed out that more than 2 trillion won of taxpayers’ money will be injected into the joint venture.
“Management should return their own wages before giving out bonuses,” one shareholder said.
Lotte Chemical has not made a profit since 2022, grappling with a prolonged slump caused by oversupply from China and the Middle East. Carrying more than 13 trillion won in debt, the company’s stock price has also declined over the past five years.
Once a cash cow for Lotte Group, the petrochemical arm is now raising concerns about the entire group’s financial stability, forcing other affiliates to secure liquidity.
“Due to prolonged geopolitical risks and a global supply glut, our financial performance fell short of shareholder expectations last year,” Lotte Chemical CEO Lee Young-jun said at the shareholders’ meeting last month.
He added that the company will continue shedding non-core businesses and reduce its reliance on commodity petrochemical products.
Over the past five years, Lotte Chemical has liquidated or sold 23 subsidiaries at home and abroad, raising nearly 2 trillion won in cash.
The company is reportedly moving ahead with the sale of its construction materials division and Lotte Ecowall, a subsidiary specializing in curtain walls, which refer to nonstructural, lightweight exterior panels designed to protect buildings from the elements and withstand wind pressure.