By Choi Sung-jin
While most domestic businesses are trimming payrolls and cutting costs amid a prolonged economic slump, oil and chemical companies are holding “bonus parties.”
GS Caltex, for instance, paid its employees 500 percent of basic salary as bonuses in December, and an additional 350 percent last month. SK Innovation also gave up to 800 percent of base pay just before the Lunar New Year, depending on performance.
These and other refiners showed the biggest gains since 2011 last year. S-Oil, which recorded 870 billion won ($704 million) in operating profit, the second biggest in its history, will reportedly pay bonuses equivalent to 700 percent of basic salaries, industry sources say.
The size of bonuses was smaller for petrochemical companies but most of them, including LG Chemical and Hanwha Chemical, have given special allowances equal to between 200 percent and 300 percent of basic salaries.
Such large-scale bonus parties at oil refiners and petrochemical companies are the first in five years. For four years from 2011, they performed poorly as international oil prices surged, dragging down demand for their products.
Last year, the situation turned around. With falling oil prices, refiners’ production costs dropped sharply and demand for petroleum products surged, drastically increasing their operating profits. The combined operating profit of the three major refiners was 4.15 trillion won last year - 1.98 trillion won for SK Innovation, 1.3 trillion won for GS Caltex and 870 billion won for S-Oil.
Some corners of the business community and civic groups are not casting favorable glances toward the hefty performance pay, saying refiners have lowered prices by driblets and are stingy in their social contribution.
The industry has something to say, however. “Early last year, our performances were so poor that some executives had to give back their salaries,” an industry executive said. “This year’s salaries are aimed in part at making up for our failure to pay bonuses because of weak bottom lines over the past few years.”