Samsung Electronics (005930.KS) and its labor union failed to narrow their differences despite government-led post-dispute mediation, collapsing what would have been the largest performance bonus negotiation in Korean corporate history. The union plans to launch a general strike as scheduled on the 21st. However, neither side has completely shut the door on dialogue, leaving room for last-minute negotiations.
On the 13th, Samsung Electronics issued a statement saying, "The post-dispute mediation that the government worked hard to arrange has unfortunately collapsed due to the union's declaration of breakdown." The company added, "The government supported the negotiations by presenting various alternatives based on both sides' arguments, but the union declared a breakdown in the early hours of today." It further said, "The union's decision is an action that causes great concern and anxiety to the company, as well as to employees awaiting a settlement, shareholders, and the public," adding that it was "deeply regrettable."
Samsung Electronics continued, "The union has rejected the company's flexible institutional approach based on business performance and has consistently insisted only on rigid institutionalization." The company said, "We will continue our efforts to prevent the worst-case scenario through sincere dialogue until the end."
The union also left the possibility of dialogue open. Choi Seung-ho, chair of the Samsung Electronics branch of the National Samsung Electronics Union who led the negotiations, said of the possibility of further talks, "There are no plans at the moment," but added, "If necessary, we are willing to listen if the company brings a proper agenda."
What Were the Key Sticking Points in the Failed Labor Talks?
Union: Distribute at least 15% of operating profit
Permanently abolish cap on Overall Performance Incentive (OPI)
Company: Maintain OPI, pay 12% of operating profit
During the two-day post-dispute mediation that began on the 11th, the two sides diverged sharply over the abolition of the OPI cap, which is tied to 50% of base annual salary, and the percentage of operating profit to be paid as bonuses.
According to industry sources, the mediation proposal prepared by the National Labor Relations Commission, which arbitrated the post-dispute mediation process for Samsung Electronics' labor-management renegotiation, included maintaining the OPI system based on the economic value added (EVA) method. In addition, for the Device Solutions (DS) division only, if it ranks first in domestic revenue and operating profit, bonuses equivalent to 12% of operating profit would be paid, exceeding the OPI.
OPI is Samsung Electronics' signature performance bonus system, under which up to 50% of an employee's annual salary is paid when each business division's results exceed its initial annual targets. Last year, the DS division's OPI payout ratio was 47%, meaning DS employees received additional compensation equivalent to 47% of their annual salary.
Since the union had originally argued for the elimination of such bonus caps, it criticized the mediation proposal that maintained the relevant regulations as "actually a regression" and rejected it. The union demanded until the end that the bonus cap be abolished and that 15% of operating profit be set aside as a bonus pool, exceeding the "more than 10% of operating profit" previously proposed by the company. During this renegotiation process, the union reportedly demanded that bonuses be lowered to 13% of operating profit but with additional stock compensation equivalent to 2 percentage points, effectively sticking to the 15% pool and failing to close the gap with management.
The union also objected to the proposal to pay 12% of operating profit to the DS division, saying it came with the condition of surpassing SK hynix, and that the proposal itself would only apply this year, with no guarantee for next year and beyond. The union explained, "The union's demand is the transparent abolition of the cap and its institutionalization. It is not desirable to leave our performance to external factors, and we declared a breakdown because we cannot accept a one-off proposal."
Samsung Electronics, on the other hand, expressed concern that if the bonus pool soared to 15% of operating profit, the labor cost burden would become excessive, potentially dampening future investments such as infrastructure expansion, research and development (R&D), and new business mergers and acquisitions (M&A). The company also raised fairness concerns regarding employees in the Device eXperience (DX) finished-products division, who effectively have no profits due to weak performance, even if 15% of operating profit were paid as bonuses without a cap.
Meanwhile, Samsung Electronics' expected operating profit this year stands at around 340 trillion won based on the consensus estimate over the past month. Under the company's proposal (12%), approximately 41 trillion won would be paid as bonuses, while the union's proposal (15%) would result in approximately 51 trillion won in bonuses. Based on the 78,000 employees in Samsung Electronics' semiconductor (DS) division, the average bonus per person would be 520 million won under the company's proposal and 650 million won under the union's proposal.
