Value context and insight. lkm@koreatimes.co.kr
'Greedy' foreign firms stingy with investment, job creation
By Lee Kyung-min
By Lee Kyung-min
Foreign firms in Korea sharply cut investment and hiring last year despite solid corporate performances, in a much-criticized move compared to many local firms that boosted both amid declining profits, data showed Sunday.
Criticisms grew as most foreign companies operating here kept their “high-dividend policy” unchanged whereby over 80 percent of corporate net profit is returned to their headquarters with some sending dividends far greater than their net profit.
Data from CEO Score, a corporate performance tracker, showed 43 foreign firms among the top 500 companies by sales invested about 3.4 trillion won ($2.8 billion) here in 2019, down 25.5 percent from a year earlier. Their number of employees dropped to 86,187 in the same period, down 4.3 percent, or 3,914, from the year before.
The noticeable reduction in the two key corporate areas came despite an aggregate 149.3 trillion won in sales and over 5.4 trillion won in operating profit, a 3.8 percent and 7.4 percent increase, year-on-year.
This sharply contrasts with 161.9 trillion won in investments made by 404 local firms among the top 500 in 2019, up 1.8 percent from the previous year. The number of employees hired by them increased to 1.46 million in 2019, up 23,796, or 1.7 percent from the 1.44 million in 2019.
The figures followed a 142 trillion won in operating profit in 2019, a woeful 30.2 percent drop from a year earlier. Their sales reached 2,517 trillion won in the same period, up 2.1 percent.
Chief among the foreign firms that reduced both investment and employment was S-Oil which reported a 59.5 percent year-on-year decrease in investment and a 1 percent year-on-year decrease in employment, respectively.
The petro-refinery whose parent firm is Saudi Aramco was followed by Corning Precision Materials (-38.9 percent, -2 percent), 3M Korea (-18.9 percent, -2.4 percent), Kumho Tire (-43.6 percent, -2.9 percent) and Standard Chartered Korea (-7.2 percent, -4.1 percent).
The 43 foreign firms had a high dividend payout ratio of 80.7 percent in 2019, up 0.7 percentage points from the year before, thanks to a greater drop of 2.5 percent in the net profit relative to that of 1.6 percent in dividends paid out totaling 2.82 trillion won. The ratio is measured by the total dividends paid divided by the net profit of a company.
Standard Chartered Korea paid dividends of 655 billion won, more than double its net profit of 314.4 billion won, jacking up the ratio to 208.3 percent.
The ratio was 160 percent for Oriental Brewery (OB), Volvo Cars Korea (127.2 percent), Toray Advanced Materials Korea (110.7 percent), Jaguar Land Rover Korea (100 percent), Toyota Motor Korea (100 percent), Yuhan-Kimberly (99.9 percent), Novelis Korea (96.8 percent), Tongsuh Petrochemial (93.7 percent) and Murata Manufacturing (87.4 percent).
Foreign firms made only half of the donations compared to their local counterparts.
The 43 made a combined 71 billion won in donations in 2019, a 6.1 percent year-on-year increase. When measured by the amount divided by sales, the ratio is about 0.05 percent, only half of the 0.1 percent rate, maintained by the 404 local firms.