A Strike Averted, but the Hard Questions Begin
Samsung Electronics — South Korea’s largest company and the world’s top memory-chip maker — has reached a tentative agreement with its labor union over performance bonuses, narrowly avoiding a strike. Yet analysts and executives say the deal solves one problem while opening many others, marking the start of a broader debate in Korea over how corporate profits should be shared.
Kim Ji-hyung, chair of the government’s Economic, Social and Labor Council and a former head of Samsung’s compliance oversight committee, told the newspaper Hankyoreh that the settlement deserves credit, citing the saying that “a bad reconciliation is better than a good court ruling.” But he cautioned that “the end of negotiations does not mean the end of the problem — this is where the real work begins,” calling for a wider social consensus on how performance pay is calculated.
What Changed in the Deal
The tentative agreement splits compensation into a standard performance incentive (OPI) and a special bonus for the company’s Device Solutions (DS) division, which makes semiconductors. The most significant shift is in how the bonus pool is determined.
Previously, Samsung based bonuses on Economic Value Added (EVA) — broadly, after-tax operating profit minus the cost of capital. Because the company never disclosed exactly how it calculated EVA, the union long complained the system was opaque. Under the new deal, the benchmark becomes “business performance jointly agreed by labor and management.” While defining that figure may bring fresh disputes, observers say it is a clear step toward greater transparency in how profits are divided.
A Trend Spreading Across Korean Industry
Executives expect the Samsung outcome to set a precedent far beyond chipmaking. “This isn’t just a problem for Samsung and SK hynix,” said an executive at one of Korea’s five largest conglomerates, referring to the two firms sometimes nicknamed “Samsung-nix.” “It could touch every industry and grow into a social issue,” with pressure also coming from subcontractors and local communities.
Indeed, unions at major firms including Kakao, Hyundai Motor, shipbuilder HD Hyundai, telecom carrier LG Uplus and Samsung Biologics are now demanding bonuses tied to a fixed percentage of operating profit. “The push to claim a set share of profits is likely to spread further,” another business leader said, “and the Samsung agreement could become a reference point” — though firms without Samsung-scale earnings may struggle to match such payouts.
Stock Instead of Cash
The decision to pay part of the bonus in shares rather than cash has drawn praise. By placing limits on when employees can sell the stock, the plan links short-term results to long-term corporate value and raises expectations for stronger shareholder returns.
Kim Woo-chan, a Korea University professor and head of the civic group Solidarity for Economic Reform, said stock compensation “fits the goal of tying bonuses to long-term performance,” adding that sharing gains with subcontractors will be the next major challenge.
Hong Sung-kook, who chairs the ruling Democratic Party’s National Economic Advisory Council, described the deal as patching over years of accumulated tension. He urged companies to build “rational and objective” bonus systems, and argued that firms which have long paid minimal dividends will now face pressure to return more to shareholders as well.
Based on Korean-language reporting. Source: 삼성전자 성과급 합의…이익 배분 ‘뉴 노멀’ 서막 열었다 (한겨레). Summarized and rewritten for international readers.
