The government is considering institutional reforms that would make it mandatory for companies to undergo prior review by the board of directors and obtain approval at a general shareholders' meeting when determining the scale of performance-based bonuses.
The move is intended to establish internal control mechanisms involving shareholders, as the trend of demanding "a certain percentage of operating profit as bonuses" has spread across the business sector following recent labor-management conflicts over bonuses at Samsung Electronics.
According to government authorities on June 24, the Ministry of Trade, Industry and Energy is reviewing improvement plans with this direction in mind.
A high-ranking official from the Ministry of Industry explained, "The ministry's position is that performance-based bonuses, which do not constitute wages, are essentially unrelated to working conditions and therefore cannot be a subject of labor disputes." The official added, "We are considering establishing internal discussion and control procedures that require bonuses above a certain scale to be reviewed by the board of directors in advance and approved by a general shareholders' meeting."
Regarding the implementation method, the official added, "We are considering amendments to the Commercial Act or the Capital Markets Act, but since these require parliamentary procedures and take time, we plan to first consult with relevant ministries to see if adjustments can be made through enforcement decrees."
The government is accelerating these institutional improvements because labor unions in other sectors, such as automobiles and shipbuilding, are demanding a certain percentage of operating profits as bonuses, following the unprecedented bonuses at Samsung Electronics and SK Hynix, which are enjoying a semiconductor boom.
The government views the current structure, in which shareholder opinions are effectively excluded from the process of distributing operating profits, as unreasonable.
The plan is to establish a fair compensation system for shareholders who bear the risks through institutional reform and to control the exhausting labor-management conflicts surrounding bonuses within an institutional framework.
Minister of Trade, Industry and Energy Kim Jung-kwan stated at a press conference with reporters on June 22, "Regarding operating profits, it is not just management and labor involved; there are also investors who have entered the market prepared for losses." He added, "It is not appropriate for performance-based bonuses to be a subject of labor disputes."
Minister Kim said, "Since workers are guaranteed a basic salary, compensation for investors who take on risks should be guaranteed differently from that of unions and management," adding, "The perspective of investors is missing from the discussion, so institutional supplementation is necessary."
The presidential office also defined the current situation as a special case and supported the need for institutional improvement.
Kim Yong-beom, Chief of Staff for Policy at the presidential office, pointed out at a Kwanhun Club debate held today, "Originally, labor and management base their negotiations on wages and other conditions, but now the 'other' (performance-based bonuses) has become larger," adding, "This is a world-first case."
Kim emphasized, "Whether performance-based bonuses can be a subject of labor disputes is a point that requires social discussion," and added, "We need to have discussions (regarding bonus negotiations) to create new rules."
(Photo: Provided by the Ministry of Trade, Industry and Energy, Yonhap News)