Nam Hyun-woo has worked as a staff writer at The Korea Times since 2013, mostly covering business and politics. He currently belongs to the Business Desk where he covers topics such as emerging tech, AI, ICT and Korea's chaebol community. Prior to joining the team, he was the paper's correspondent for the presidential office of Korea during the Yoon Suk Yeol and Moon Jae-in administrations.
Profit-linked bonuses at Samsung, SK unlikely to spread across Korean biz
Members of the Samsung Electronics Labor Union hold a rally in front of the Samsung Electronics Pyeongtaek campus in Godeok District, Pyeongtaek, Gyeonggi Province, April 23. Korea Times photo by Shim Hyun-chul
By Nam Hyun-woo
SK hynix employees consider unified labor union
The hefty profit-based performance bonuses at Samsung Electronics and SK hynix are unlikely to become a new norm among Korean businesses, as the government considers amending regulations to subject such bonus plans to shareholder approval.
Speaking at a press forum on Thursday, Industry Minister Kim Jung-kwan said he “opposes linking employee incentives directly to a company’s operating profit,” and that the government is discussing revisions to the Commercial Act and the Financial Investment Services and Capital Markets Act that would require companies to secure shareholder approval before paying such performance bonuses.
The comment came as a growing number of labor unions at large companies have been demanding that a portion of operating profit be used to fund performance bonuses.
Last year, SK hynix agreed with its labor union to allocate 10 percent of operating profit for performance bonuses to share the massive profits generated from its memory chip business. In May, Samsung Electronics reached a similar agreement to allocate 10.5 percent of operating profit to performance bonuses after a standoff with its union.
Similar demands have since spread to labor unions at other large companies, fueling controversy over widening economic polarization. Criticisms also stirred that employees are taking a share of corporate gains without an increase in dividends for shareholders.
“An incorporated company belongs to its shareholders, and those who are equivalent to them are investors who bear the risks,” Kim said. “However, shareholders and investors are absent from the debate over performance bonuses.”
President Lee Jae Myung speaks during a Cabinet meeting at Cheong Wa Dae in Seoul, Tuesday. Joint Press Corps
President Lee Jae Myung said last month that disputes over allocating a certain portion of operating profit to performance bonuses should not be treated as labor disputes. The government plans to issue related guidelines later this month.
Following Lee’s comments, some shareholders, including a group called the Korea Shareholders Movement Headquarters, filed police complaints last month against the CEOs of Samsung Electronics and SK hynix, while also filing a complaint against the labor minister with the Corruption Investigation Office for High-ranking Officials.
The group argued that while performance bonuses are not subject to collective bargaining or labor disputes, the chipmakers still agreed with their unions on bonus programs funded by a certain portion of operating profit.
In an opinion letter submitted last week, the group called on the government to establish standards through legally binding regulations rather than simple administrative guidelines. It also urged the National Assembly to revise labor relation laws to clarify that decisions on the allocation or distribution of corporate profits do not constitute working conditions.
However, unions are expressing opposition to the government’s move. The Korean Confederation of Trade Unions (KCTU), one of the two largest umbrella unions in the country, said in a statement that Lee’s comments are “irresponsible” and “turn a blind eye to the reality of workers.”
“Whether compensation is paid as wages or performance bonuses is the result of arrangements that labor and management have developed through years of negotiations, negotiating how workers should be rewarded and how the fruits of their labor should be shared is one of the most fundamental roles of a labor union,” the KCTU said. “Denying this is a biased stance that defends only the exclusive rights of capital.”
SK hynix headquarters in Icheon, Gyeonggi Province, July 29. Yonhap
Against this backdrop, employees at SK hynix are moving to establish a new union that would bring together production and office workers, Yonhap News Agency reported Sunday.
Currently, the company’s technical and office workers’ union and production workers’ union are engaging wage and collective bargaining negotiations, respectively. However, employees reportedly saw a need for a unified response after management proposed paying part of the 10 percent performance in treasury shares.
The move also reflects concerns that the existing unions have not responded strongly enough to the government’s opposition to profit-linked performance bonus schemes. The planned unified union is seen as an effort to expand its membership base and strengthen its bargaining power.