Hankyungyeon "Strengthened Korean Labor Unions Must Also Increase Accounting Transparency"

Need for Public Discussion on Social Responsibility Proportional to the Increased Influence of Labor Unions
Mandatory Use of Professional, Independent Audits for Labor Unions in Large and Public Enterprises

[Asia Economy Reporter Changhwan Lee] There has been a call for public discussion on the social responsibility of labor unions in South Korea, including their democratic management. Although domestic unions are not large-scale industrial unions like those in the West, which are prone to corruption, the report argues that as their roles and authority become more significant, social responsibility measures such as professional accounting audits are necessary, at least for unions in large corporations and public enterprises.

On the 17th, the Korea Economic Research Institute released a report titled "A Study on the Social Responsibility of Labor Unions in South Korea: Focusing on Enhancing Accounting Transparency of Unions," highlighting this issue.

The report analyzed that in the US and Europe, there is a very strict response to financial corruption issues involving large industrial unions. While South Korea does not have such large unions like those in the West, it argues that unions in influential sectors such as large corporations and public enterprises should still maintain a sense of social responsibility.

In fact, financial corruption within unions in large domestic corporations has occasionally occurred, and discussions on USR (Union Social Responsibility), such as ISO26000, are practically present internationally, the report stated.

Professor Sanghee Lee of Korea University of Technology and Education, who authored the report, said, "Among domestic unions, those in large corporations or public enterprises of a certain scale have high unionization rates and powerful union activities based on financial independence, making their direct and indirect influence on our society impossible to ignore. Their active union activities can significantly impact wage gaps between large and small-medium enterprises, so there is a need to publicize the social responsibility of labor unions, at least limited to unions in large corporations and public enterprises."

Professor Lee noted that in the US and UK, accounting oversight systems for unions are regulated very strictly through legislation.

In the UK, unions are required to submit annual reports to administrative authorities, emphasizing the importance of accounting audit systems. In the US, union officials must report to the Secretary of Labor regarding assets or income such as stocks, bonds, and securities related to companies or businesses they transact with, highlighting transparent management of union assets and officials' asset reporting responsibilities.

Germany and France do not have labor law regulations concerning union finances or accounting but entrust union autonomy through strict union bylaws. In France, the union treasurer is obligated to regularly report financial matters to the union's governing body, and financial reporting is mandatory at union general meetings to ensure members' right to information.

Additionally, unions appoint specialized union members who are not office holders as audit committee members to oversee financial management. German unions have comprehensive audit regulations not only for accounting but also for union operations, which are rarely implemented in other countries.

In Japan, although cases of union financial corruption are rarely known, the Union Act requires that accounting reports be accompanied by certificates verified by professional auditors such as certified public accountants, audit firms, or trust companies.

Professor Lee evaluated, "In major countries, whether through legislation or union autonomous bylaws, issues like union accounting transparency are reflected as fundamental responsibilities that unions must uphold. This forms the basis for unions to be democratically operated."

He argued that in South Korea, at least preventive measures such as accounting audits for unions in large workplaces or unions above a certain scale are necessary for democratic union management.

This is because financial corruption cases related to unions often occur domestically, mainly in large workplaces. However, South Korea currently lacks mandatory regulations on union accounting reporting or the selection of audit committee members, which inevitably limits democratic union management.

He pointed out, "Regarding financial and accounting corruption or management functions of domestic labor unions, there are neither comprehensive legal regulations for large union finances like in the US or UK, nor well-established autonomous bylaw functions with a long tradition like in Germany and France."

Considering the characteristics of financial corruption in large corporate unions emerging domestically, Professor Lee suggested the need to review mandatory internal and external accounting audits conducted by auditors with professional accounting qualifications for large corporations and public enterprises above a certain scale. He also mentioned the need to consider measures to guarantee union members' access to information related to union financial accounting.

Furthermore, for large unions, not only accounting transparency but also the need to enhance transparency in union operations is presumed to be high, so exploring mandatory operational audits of unions is also necessary.

However, Professor Lee added that these transparency enhancement measures could be implemented either by directly incorporating related regulations into legislation, as in the Anglo-American model, or by reflecting them as mandatory items in union bylaws, similar to the German and French approaches.

This content was produced with the assistance of AI translation services.