As Samsung Heavy Industries achieved its best performance in 11 years this year, a labor-management conflict over the size and calculation standards of year-end bonuses is spreading to concerns about production disruptions. The Target Achievement Incentive (TAI) paid on the 24th was set at 50% of the monthly base salary, the same level as the first half and last year, prompting a strong backlash from employees. The Samsung Heavy Industries workers' council, following a protest trip to the Samsung Group's Seocho office, has even warned of physical actions such as refusing vessel deliveries.
According to the shipbuilding industry on the 31st, the Samsung Heavy Industries workers' council has been holding a protest in front of the Samsung Electronics Seocho office building in Seocho-gu, Seoul, since the 29th, demanding improvements to the bonus system. The council said that if the management does not present a forward-looking plan, it will raise the level of struggle from a simple picket protest to actions that cause tangible production damage.
Chairperson Choi Won-young of the Samsung Heavy Industries workers' council told ChosunBiz, "Even though we achieved our best results in more than a decade after passing through a long tunnel of losses, the company is still hiding behind opaque standards to ignore employees' legitimate demands for compensation." Choi noted, "Support from the field is essential for future flagship businesses such as MASGA to get on a successful track," adding, "If the structure in which the management monopolizes the gains is not fixed, employees will have no rationale to work with a sense of mission."
The council raised the pressure by delivering an official letter to Vice Chairperson (CEO) Choi Sung-an of Samsung Heavy Industries the previous day, demanding that a labor-management negotiation table be set up for the bonus system and that an improvement plan be presented. The council plans to escalate its struggle to actions such as halting processes and delaying vessel deliveries if Choi does not provide a convincing answer by Jan. 9.
◇ Operating profit up 70%, but employee discontent grows over flat bonuses
Brokerages expect Samsung Heavy Industries' operating profit this year to increase more than 70% from last year. According to financial data firm FnGuide, as of the 29th, the annual operating profit consensus (average of securities firms' forecasts) for Samsung Heavy Industries is estimated at 871.3 billion won, and net profit at 657.9 billion won. Compared to last year (operating profit 503 billion won, net profit 64 billion won), results have improved significantly. Profitability has especially strengthened in the second half. According to brokerage estimates, Samsung Heavy Industries' second-half operating profit is predicted to have increased 60% from the first half.
On the 24th, Samsung Heavy Industries paid employees 50% of their monthly base salary as the second-half Target Achievement Incentive (TAI), the same as last year and the first half of this year. TAI, one of Samsung Group's regular bonus systems, is paid twice a year, in the first and second halves, with up to 100% of the monthly base salary paid on a differential basis according to evaluation criteria.
In TAI evaluations, Samsung Heavy Industries uses comparative indicators such as operating margin, earnings per share, and return on invested capital (ROIC) against peers, and calculates payout rates by factoring in safety indicators and whether management goals were met. Among Samsung Heavy Industries employees, complaints erupted that "even though we posted much better results than last year or early this year, it is hard to accept paying the same 50% at year-end by prioritizing comparisons with competitors."
As internal discontent grew, management held an in-house briefing on the 29th led by Chief Financial Officer Kim Kyoung-hee (executive vice president) to share the business status. At the meeting, Kim was quoted as explaining the rationale for the bonus calculation, saying that "compared to competitors such as HD Hyundai Heavy Industries and Hanwha Ocean, our profit margin is at 50%–77% of theirs, and unlike competitors, we did not gain foreign exchange gains from a strong dollar because we have a 100% currency hedging policy."
Employees criticized this, saying, "Management chose a conservative hedging strategy, and yet, by comparing us with competitors who enjoyed currency gains, it is clearly shifting responsibility by keeping bonuses at last year's level despite the best results in a decade."
◇ "Base ours on operating profit like HD Hyundai Heavy Industries… if not improved, we will move to delay vessel deliveries"
The bonus controversy appears to be shifting to the Overall Performance Incentive (OPI, formerly PS), scheduled to be paid early next year. OPI, considered the core of Samsung's bonus system, pays up to 50% of annual salary within a cap of 20% of excess profit over the division's annual target.
Samsung Heavy Industries has not paid OPI since 2014, when the shipbuilding downturn began. In 2023, it posted an operating profit in the black for the first time in eight years, but OPI was not paid because it recorded a net loss of 148 billion won; even last year, when it returned to a net profit, OPI payments fell through because costs such as order cancellation fees stemming from the Russia-Ukraine war were reflected. Instead, the company paid a one-time lump sum early this year as an encouragement bonus.
Some Samsung Heavy Industries employees are calling for changes to the bonus criteria. Samsung calculates OPI based on economic value added (EVA), deducting corporate tax and capital costs such as investment funds from after-tax operating profit. Even if operating profit is large in absolute terms, EVA can be low if expenses were high. The EVA formula is a trade secret and not disclosed externally.
Dissatisfaction with this bonus system has been consistently raised across Samsung affiliates. The National Samsung Electronics Union (Jeonsamno), the largest union at Samsung Electronics, also went on the first strike since the company's founding on the 7th last year, demanding improvements to the EVA-based OPI.
The council said it will raise the level of struggle until a bonus system based on operating profit, like at competitors such as HD Hyundai Heavy Industries, is introduced. The council plans to push ahead with high-intensity actions such as delaying vessel deliveries starting next month if management does not present an alternative by the ultimatum deadline previously notified.