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, not an end. The agreement is fueling a broader industrywide debate over to whom, and how much, large corporations should distribute the profits they earn.
Subcontracted and partner-firm workers and farmers' groups say Samsung Electronics' performance should not belong only to regular employees at the parent company and are demanding broader profit sharing. On the other hand, shareholder groups warned of legal action, saying excessive bonuses could infringe on shareholder interests. With Samsung Electronics following SK hynix in accepting a "bonuses tied to N% of operating profit" structure, other big-company unions are escalating similar demands.
◇Following subcontracted workers, even farmers' groups: "No monopolizing the gains"
The Korean Confederation of Trade Unions (KCTU) and the Federation of Korean Trade Unions, the two major umbrella groups, said on the 21st that Samsung Electronics' performance should not remain only within the parent company. They argued that not only Samsung Electronics employees but also partner-firm and subcontracted workers contributed to production and growth, and therefore must be included in profit-distribution talks.
The Korean Confederation of Trade Unions said in a statement titled "Go beyond the fence and fulfill the responsibility of social solidarity and mutual growth" that "the global results achieved by Samsung are not the exclusive property of regular employees at large companies," adding they are "the fruit of 'total social labor' combining the labor of nonregular workers at subcontractors and partner firms who endured risks and poor conditions with the infrastructure of local communities."
It added, "There can be no monopolization of the gains," and "the outcome of this agreement must lead to improved treatment for subcontracted workers and returns to local communities."
The Federation of Korean Trade Unions also issued a position paper titled "Samsung Electronics labor-management deal as a starting point for discussions on profit sharing and social responsibility," saying, "The performance 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 countless partner firms and workers together," and "practical measures that overhaul the broader industrial ecosystem must follow, including improving unit-price structures for supplied parts, sharing technology and production gains, and strengthening win-win cooperation, so that the fruits of performance are fairly distributed to partner-firm workers as well."
The discussion is spreading beyond improving treatment for partner-firm workers to demands from farmers' groups. The Korea Peasants League said, "The source of Samsung Electronics' enormous profits includes the blood and sweat of farmers who have been thoroughly ignored," arguing, "to run semiconductor plants in the Seoul metropolitan area, huge transmission towers are being erected in rural non-metropolitan regions, and even when agricultural water is lacking, pipelines are first laid to factories."
Citing this, the league called for legislating a "trade gains sharing system." The system would reclaim part of the profits of corporations that benefit from free trade agreements and use them to support industries harmed, such as agriculture and fisheries. The league said, "Rather than leaving the national economy to the voluntary goodwill of corporations, the government and the National Assembly must directly step in to correct the distorted monopolization of wealth."
◇Shareholder groups push back: Lawsuit signaled over "infringement on shareholders' share"
In contrast to demands for broader profit sharing, shareholders argue the deal could infringe on shareholder interests. A Samsung Electronics shareholder group signaled legal action, saying the tentative labor-management wage agreement may be unlawful.
The "Korea Shareholder Activism Headquarters," a shareholder group, held a rally near the home of Samsung Electronics Chairman Lee Jae-yong and argued, "The labor-management deal that accumulates and allocates 12% of pre-tax operating profit substantially infringes on the residual-asset claim that should belong to shareholders."
The group said that if a board resolution to ratify and execute the deal is tabled, it will file a suit seeking confirmation of nullity and also apply for an injunction based on the right to demand cessation of unlawful acts. It also signaled it would file a shareholder derivative suit seeking damages against all directors who supported the tentative agreement, citing violation of directors' "duty of loyalty" under the Commercial Act.
Because the revised Commercial Act extends the object of the director's duty of loyalty to not only the company but also shareholders, the logic goes, an excessive bonus deal could constitute an unlawful act that infringes on shareholder interests.
However, legal circles say even if the shareholder group files suit, the practical effect is likely limited. Because the group is not a direct party to the wage and collective agreements, it is difficult to recognize legal standing to seek a suspension of effect through an injunction, and its standing as a plaintiff is unclear even in a suit for confirmation of nullity of the board resolution.
A labor-law specialist attorney said, "The mere fact that the labor-management deal is unfavorable to shareholders may make it difficult to specify concrete grounds for nullity."
Many also say a damages suit against directors is unlikely to be accepted. That is because courts have recognized broad business judgment discretion regarding labor-management 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 there is an extreme exception such as the company going bankrupt, a direct claim by shareholders is unlikely to be allowed."
◇Demand for "N% bonuses" spreads across industries
The Samsung Electronics deal is influencing bonus demands by other unions. After SK hynix first agreed to pay 10% of annual operating profit as bonuses, Samsung Electronics also decided to use 12% of business performance as the bonus pool, fueling a trend among big-company unions to demand an "N% bonus system."
By union, demands submitted 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 drafted a tentative deal right before a strike. However, they expressed concern about the spread across industries of demands to pay a set percentage of operating or net profit as bonuses.
The Korea Chamber of Commerce and Industry, The Federation of Korean Industries, and the Korea Enterprises Federation evaluated the Samsung Electronics labor-management agreement as meaningful for dialogue and compromise, but pointed 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 an appropriate level of profit with stakeholders such as shareholders and employees," but added, "Each corporation faces different investment sizes, economic volatility, and costs to secure future competitiveness, so demanding a uniform 'our share' could end up cutting open the goose that lays the golden eggs."