Following SK Hynix, there is growing interest in whether Samsung Electronics will use stocks for performance compensation for its members. Samsung Electronics has stated that there have been no discussions on this matter, but industry insiders suggest that the company, which announced a large-scale stock buyback plan last year, is likely to consider using its own shares, including the payment of performance-based stocks (RS).
More corporations are paying RS to employees. In the past, stock options were the most commonly used compensation program. However, stock options are relatively complicated in terms of issuance and receipt, and as the financial authorities have encouraged listed corporations to buy back their own shares as part of a value enhancement strategy for the Korean stock market, many corporations are now contemplating how to utilize their own shares.
According to industry sources on the 16th, rumors are spreading among Samsung Electronics employees that part of the excess profit incentive (OPI) to be provided this month could be paid in stocks. The payment of Restricted Stock Awards (RSA) with a one-year mandatory holding requirement has been mentioned. In response, Samsung Electronics stated, "We do not know about this."
Inside and outside the company, it was noted a few days ago that SK Hynix announced its policy on RS payments, and given that Samsung Electronics has been conducting large-scale buybacks of its own shares since late last year, it is expected that the company will soon discuss plans to issue stocks to its employees.
On the 14th, SK Hynix announced that it would implement a 'shareholder participation program' and would grant employees an option to buy back shares when distributing excess profit payments (PS). Hanwha Group is also providing stocks as performance compensation for executives, including Vice Chairman Kim Dong-kwan.
Representative corporations utilizing RS include Hyundai Motor and Naver. The labor and management negotiations at Hyundai Motor, which take place annually, involve discussions on the amount of stocks the company will provide to employees. To do this, they conduct large-scale buybacks of their own shares each year, and last year they also introduced an RS system to reward high-performing executives.
Naver has been implementing an RS program since 2021 to strengthen its compensation system for employees, providing stocks for free to all employees except executives.
Until recently, stock options were representative of corporations' stock compensation programs. Stock options, which provide "the right to purchase stocks at a predetermined price," were seen as a surprising reward that could turn an ordinary salaryman into a stock millionaire due to the ability to purchase shares at a low price.
However, cases of corporate stock prices skyrocketing are not as common as before, making it difficult to expect a windfall from stock options, and related regulations have become stricter, leading to a decrease in the preference for stock options. Stock options cannot be granted to major shareholders and are limited to 10% of the total issued shares.
On the other hand, RS can be granted by the company without significant restrictions and can also be given to major shareholders. While the timing of issuance or transfer can be somewhat restricted, unlike stock options, employees can receive shares immediately, making it simpler for those receiving compensation.
However, employees will incur taxes when RS are issued. For this reason, some corporations accompany the RS with cash under the pretext of supporting stock purchases.
There have been ongoing forecasts that domestic corporations will actively adopt RS. In the United States, big tech companies like Microsoft, Apple, and Amazon have already been utilizing RS as an alternative to stock options for employee compensation.
In particular, recently, as corporations have begun buying back their own shares as a relatively easy way to bolster stock prices and enhance shareholder value, RS has gained more attention as a method of directly giving stocks to employees.
However, it has been pointed out that using the repurchased shares for performance compensation undermines the effectiveness of boosting stock prices. Corporations can utilize their own shares by issuing RS, but ultimately, these shares will be circulated in the market. An industry source noted, "From the company's perspective, paying compensation in stocks can save cash, and since they are not directly selling their own shares in the market, they won't face criticism. However, the company needs to clearly communicate具体利用计划 to investors regarding how many shares they plan to retire after the buyback."