Bonus structure should not spread beyond Samsung

Audio report: written by reporters, read by AI

Samsung Electronics’ labor union has suspended its planned general strike, avoiding what could have become a major disruption to Korea’s semiconductor industry. Yet the unprecedented confrontation, driven by demands from highly paid workers for massive performance bonuses, has left broader concerns for Korean society and industry. Because Samsung has long been regarded as Korea’s representative corporation and a benchmark for corporate management, the impact of the dispute is likely to spread well beyond a single company.

Under a tentative agreement reached on Wednesday, Samsung Electronics decided to provide semiconductor division employees with company stock equivalent to 10.5 percent of business profits in addition to the existing OPI, or excess profit incentive, system. It is at least fortunate that the company avoided formally institutionalizing a permanent “X percent of operating profit” bonus structure. Still, concerns remain because the agreement weakened basic principles by allowing bonuses to be distributed even to loss-making divisions. The aftereffects could prove significant both within Samsung and across other industries.

Indeed, similar bonus demands have already emerged at Hyundai Motor, HD Hyundai Heavy Industries, Samsung Biologics and Kakao. Such demands are difficult to find elsewhere in the world because they effectively undermine shareholder authority and the dividend structure that forms the foundation of publicly traded corporations. Employees who bear none of the investment risk would effectively claim profits ahead of shareholders and creditors. Shareholder groups at Samsung Electronics have already announced possible legal action, arguing that the agreement may violate corporate governance principles.

Critics argue that the revised Trade Union Act, commonly known as the “Yellow Envelope” law, helped create the conditions for such demands. By expanding the scope of strike-related bargaining to include management decisions and reducing unions’ legal and financial liabilities for illegal strikes, the law strengthened the negotiating power of large corporate unions. Legislation originally intended to protect vulnerable workers is now being used as leverage by highly paid employees at major conglomerates seeking larger bonus packages.

The broader consequences may not stop there. Soon after Samsung’s tentative agreement was announced, both the Korean Confederation of Trade Unions and the Federation of Korean Trade Unions demanded that performance gains also be shared with subcontractor employees.

But the most meaningful social contribution companies can make is to generate profits, pay taxes, invest and create jobs. Calls to divide profits without regard for investment capacity amount to cutting open the goose that lays golden eggs.

While Samsung management and labor were locked in negotiations, China’s largest DRAM maker, CXMT, announced that its net profit had surged 17-fold. The company has accelerated its expansion under China’s demanding “996” work culture, while Korean chipmakers remain constrained by the 52-hour workweek system. Korea’s industries are not in a position to focus on dividing short-term gains. Excessive demands should be restrained, and lawmakers should move quickly to revise a yellow envelope law that is increasingly drifting away from its original purpose.

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.