The government is pushing a plan that would require companies to obtain prior board review and shareholder approval when determining the size of performance-based bonuses. After Industry and Trade Minister Kim Jung-kwan recently said that "it is not appropriate for bonuses to become the subject of labor disputes," the government began revising the system toward establishing internal deliberation and control procedures, under which bonuses above a certain size would be reviewed in advance by the board of directors and pass through a shareholder meeting resolution. Kim Yong-beom, head of the Presidential Office of Policy Planning, also lent weight to reining in bonuses, saying at a Kwanhun Club debate Tuesday, "We need to hold discussions and create new rules."
It is fortunate that the government has set a firm position on the bonus controversy. Beyond that, the government must prevent demands for "a bonus equal to N% of profits" from spreading across industries—from semiconductors to autos, shipbuilding, and bio. Samsung Electronics, which is expected to post operating profit of 150 trillion to 200 trillion won this year, would have to set aside tens of trillions of won for bonuses. The Hyundai Motor union, which voted to strike while demanding "payment of a bonus equal to 30% of net profit," can launch a walkout at any time after the National Labor Relations Commission issued a decision to halt mediation Wednesday. On top of this, demands for "N% bonuses" are spreading across industries regardless of sector—including Kia, HD Hyundai Heavy Industries, Samsung Biologics, LG Uplus, and Kakao—and subcontractors are joining the procession one after another.
By contrast, companies in major rival nations are staking their survival on securing next-generation growth engines—such as artificial intelligence (AI), data centers, semiconductors, electric vehicles, and power grids—by drawing on operating profits and internal reserves. IBM unveiled the world's first 0.7-nanometer (one-billionth of a meter) semiconductor technology that day, and Chinese automakers have risen to the top of global sales on the strength of massive government subsidies and aggressive investment. Foreign rivals watching Korea's bonus turmoil may well be cheering.
Now is not the time to be intoxicated by a "bonus feast." Since bonuses that are not wage-based are not a legitimate subject of labor disputes, control mechanisms must be put into operation quickly before social disruption escalates. Astronomical bonus payments carry a high risk of undermining the rights of shareholders and investors. They are also inconsistent with fairness and violate the order of the market economy. The government must quickly complete a plan to amend the Commercial Act and the Capital Markets Act to require excessive bonuses to pass through a shareholder meeting resolution. It also needs to consider adjusting enforcement decrees in case the National Assembly process is endlessly delayed. Now is the time for the government to demonstrate firm policy resolve and the capacity to follow through.
