POSCO tightens belt to counter slump in steel, battery markets
POSCO Group Chairman Chang In-hwa, fourth from left, and the group's senior executives pay their respects to the late POSCO founder Park Tae-joon at Seoul National Cemetery, April 1. Courtesy of POSCO Holdings
POSCO Group executives will start returning up to 20 percent of their wages this month under the leadership of Chairman Chang In-hwa, as part of group-wide efforts to reduce costs amid a slowdown in the global steel and battery industries, the company said Monday.
The nation’s fifth-largest business group is also considering abolishing stock grants, which have been used to compensate its executives for their performance.
These measures came after other Korean conglomerates recently started enforcing stricter demands on their executives by asking them to work six days a week or banning them from playing golf and writing it off as a company expense.
"This is the first time for our executives to return part of their wages, since they returned up to 30 percent of their base wages voluntarily under the leadership of Chairman Kwon Oh-joon," a POSCO Holdings spokesman said. "The abolishment of stock grants depends on our board's decision."
In 2014, after Kwon was appointed to lead POSCO, the steelmaker’s executives returned part of their wages voluntarily to counter the company’s worsening profitability. Its executives also returned 10 percent of their salaries during the recession in 2009.
POSCO Group Chairman Chang In-hwa
When Chang was appointed as POSCO Group chairman in March, he promised various measures that would lead company executives to give up their privileges, such as stock grants and high salaries, in response to controversies concerning compensation for them under the leadership of his predecessor, Choi Jeong-woo.
“I don’t think the stock grant system is bad, but we will reconsider this to satisfy public sentiment,” Chang said at that time.
In addition to reforms in its corporate culture, POSCO Group came up with seven innovative tasks for the future, including strategies to strengthen the competitiveness of the group’s flagship steelmaking business and its battery materials business, which has been identified as a future growth engine.
To overcome difficulties caused by the global oversupply of steel products and the intensifying U.S.-China trade war, the company aims to reduce more than 1 trillion won ($724 million) of production costs annually by streamlining its facilities.
It will also focus more on the production of premium products to boost profitability and introduce artificial intelligence and robots at its factories to enhance productivity.
Regarding the battery materials business, POSCO Group plans to make aggressive investments in salt lakes and mines containing lithium, because a recent deceleration in the global demand for electric vehicles has lowered global lithium prices.
The business group also said it will reorganize its non-core businesses and pursue the acquisition of promising companies within the next three years.