On the eve of a general strike, labor and management at Samsung Electronics dramatically reached a tentative wage deal, but many see it as a beginning rather than an end. The agreement is fueling a broader industrywide debate over who should share in the profits generated by large corporations and by how much.
Subcontracted and partner-company workers and farmers' groups say Samsung Electronics' performance should not be reserved only for regular workers at the parent company and are calling for broader profit-sharing. Shareholder groups, on the other hand, warned of legal action, saying excessive bonuses could infringe on shareholder interests. With Samsung Electronics following SK hynix in accepting a structure of "bonuses worth N% of operating profit," other big-company unions are stepping up similar demands.
◇ From subcontracted workers to farmers' groups… "No monopolizing the gains"
The two major labor federations, the Korean Confederation of Trade Unions (KCTU) and the Federation of Korean Trade Unions, said on the 21st that Samsung Electronics' gains should not remain only within the parent company. They argued that not only Samsung Electronics' employees but also partner-company and subcontracted workers, who contributed to production and growth, should be included in discussions on profit distribution.
The Korean Confederation of Trade Unions said in a statement titled "Go beyond the fence and fulfill the responsibility of social solidarity and coexistence" that "the global results achieved by Samsung are not the exclusive property of regular workers at large corporations," adding that it is "the fruit of 'total social labor,' combining the labor of nonregular workers at subcontractors and partner companies who withstood risks and poor conditions, and the infrastructure of local communities."
It added, "Monopolizing the gains is unacceptable," and "the results of this settlement must lead to improved treatment of subcontracted workers and returns to local communities."
The Federation of Korean Trade Unions also issued a statement titled "Samsung Electronics labor-management agreement as a starting point for discussing profit-sharing and social responsibility," saying, "The results of large corporations should not remain only within the parent company." The federation said, "The growth and production of Samsung Electronics are the result of the joint efforts of countless partner companies and workers," and added, "Practical measures that overhaul the entire industrial ecosystem—such as improving the structure of supply prices, sharing technological and production gains, and strengthening win-win cooperation—must follow so that the fruits of performance can be fairly distributed to partner-company workers as well."
The discussion is spreading beyond improving treatment for partner-company workers to include farmers' groups' demands. The Korea Peasants League argued, "Behind Samsung Electronics' massive profits are the blood and sweat of farmers who have been thoroughly ignored," adding, "To run semiconductor plants in the greater Seoul area, giant transmission towers are being erected in rural regions outside the metro area, and even when agricultural water is scarce, pipelines are laid to factories first."
Citing this, the Korea Peasants League called for the legalization of a "trade-gains sharing system." The system would recoup part of the gains of corporations that benefit from free trade agreements and use it to support industries harmed, such as agriculture and fisheries. The group said, "Rather than leaving the national economy to the voluntary goodwill of corporations, the government and the National Assembly must step in to correct the distorted monopolization of wealth."
◇ Shareholder groups push back… Lawsuit warned over "infringement of shareholders' share"
In contrast to calls to expand profit-sharing, shareholder groups are pushing back, saying the agreement could infringe on shareholder interests. A Samsung Electronics shareholder group warned of legal action, saying the tentative wage deal between labor and management could be unlawful.
The "Korea Shareholder Activism Headquarters," a shareholder group, held a rally near the home of Samsung Electronics Chairman Lee Jae-yong on the day and argued, "The labor-management agreement to accumulate and allocate 12% of pretax operating profit substantially infringes on the residual claim that should belong to shareholders."
The group said that if a board resolution to ratify and enforce the agreement is tabled, it will file a lawsuit seeking confirmation of nullity and also apply for an injunction based on the right to demand cessation of unlawful acts. It also warned it would file a shareholder derivative suit for damages against all directors who supported the tentative agreement, citing a violation of directors' "duty of loyalty" under the Commercial Act.
The logic is that, since the amended Commercial Act broadened the object of directors' duty of loyalty to include not only the company but also shareholders, an agreement on excessive bonuses could constitute an unlawful act infringing on shareholder interests.
However, legal circles say even if the shareholder group files suit, the effectiveness would be limited. Because the group is not a direct party to the wage and collective agreements, it is difficult to recognize standing to seek an injunction suspending their effect, and the group's standing as plaintiff is unclear even in a lawsuit seeking confirmation of nullity of the board resolution.
A labor-law attorney said, "It may be difficult to specify concrete grounds for nullity merely because the labor-management agreement is unfavorable to shareholders."
Many also say a damages suit against directors is unlikely to succeed. Courts have recognized broad managerial discretion over labor agreements and wage decisions.
An attorney at a major law firm said, "It must be proven that the bonus agreement constitutes a neglect of directors' duties, but under the business judgment rule, it is hard to win recognition based solely on the outcome of labor-management talks," adding, "Unless the company is going bankrupt or in other highly exceptional circumstances, direct shareholder claims are unlikely to be allowed."
◇ Demand for "N% bonuses" spreads across industry
The Samsung Electronics agreement is influencing other unions' bonus demands. After SK hynix first decided to pay 10% of annual operating profit as bonuses, Samsung Electronics agreed to use 12% of business performance as a bonus pool, fueling a trend among big-company unions to demand an "N% bonus system."
By union, demands delivered to management include bonuses funded by ▲ 30% of Hyundai Motor's net profit ▲ 30% of operating profit at Kia, HD Hyundai Heavy Industries, and LG Uplus ▲ 20% of operating profit at Samsung Biologics.
Business groups welcomed the fact that Samsung Electronics' labor and management reached a tentative agreement just before a strike. But they expressed concern about the spread across industry of demands to peg bonuses to a fixed share of operating or net profit.
The Korea Chamber of Commerce and Industry, The Federation of Korean Industries, and the Korea Enterprises Federation assessed the Samsung Electronics deal as meaningful for dialogue and compromise, while pointing out that uniform demands for profit distribution could increase uncertainty in corporate management.
An official at a business group said, "It is natural for corporations to share a reasonable level of profits with stakeholders such as shareholders and employees," but added, "Investment scale, economic volatility, and the expense of securing future competitiveness differ by corporation, and demanding a uniform 'our share' could be like killing the goose that lays the golden eggs."