Economic Sector: "Labor Director System Negatively Impacts Corporate Management... Legislation Should Be Halted" (Comprehensive)

61.5% of 200 Economic Experts Say "Labor Director System in Private Companies Negatively Affects Corporate Competitiveness"
90% Concerned About Pressure to Introduce Labor Director System in Private Sector if Legislated for Public Institutions
Economic Organizations Including Korea Employers Federation Urge Parliament to Halt Legislation in Joint Statement

[Asia Economy Reporter Kim Hyewon] As the National Assembly pushes for legislation mandating the introduction of labor directors in public institutions, the business community has called for a halt to the legislative process. There are concerns that if the bill to introduce labor directors in public institutions, currently pending in the National Assembly, passes, pressure to implement the system will increase even on private companies. Among economic experts, 6 to 7 out of 10 believe that the labor director system is not compatible with South Korea's economic system and that it would negatively affect corporate competitiveness by disrupting the balance of labor-management relations.

On the 25th, the Korea Employers Federation (KEF) conducted a survey on expert perceptions regarding the introduction of labor directors among 200 professors from economics and business departments at four-year universities nationwide. The results showed that 61.5% of respondents believed that if labor directors were introduced in private companies, it would have an adverse effect on corporate competitiveness. Among them, 28% said it would have a "significant negative impact," and 33.5% said it would have a "somewhat negative impact." Lee Junhee, head of the Labor Policy Department's Labor-Management Relations and Legislation Team at KEF, interpreted this as reflecting concerns about the incompatibility of the labor director system with South Korea's economic system and the potential delay in corporate decision-making speed caused by the introduction of labor directors.

In fact, 57% of experts responded that the labor director system does not align with South Korea's economic system. This is understood to consider the differences between some European countries like Germany, which adopt stakeholder capitalism, and South Korea's Anglo-American shareholder capitalism system. The response rate indicating that political and social pressure to introduce labor directors in private companies would increase if the National Assembly passes the bill mandating labor directors in public institutions reached 90%.

In response, KEF and other major economic organizations strongly requested the withdrawal of the legislation mandating labor directors in public institutions. Currently, bills related to the introduction of labor directors or worker-recommended directors, each sponsored by Democratic Party lawmakers Park Jumin, Kim Jooyoung, and Kim Kyunghyup, are pending in the National Assembly. KEF, the Korea Chamber of Commerce and Industry, the Korea Federation of Small and Medium Business, and the Korea Federation of Medium-sized Enterprises expressed concerns and jointly issued a statement requesting the suspension of the legislative process during the National Assembly's Planning and Finance Committee's Economic and Fiscal Subcommittee meeting, opposing the proposed amendment to the Act on the Management of Public Institutions that would mandate the introduction of labor directors in public institutions.

The business community worries that considering South Korea's confrontational and conflict-prone labor-management relations, embedding labor issues into the highest decision-making body of management, the board of directors, could fundamentally destabilize the management system. They argue that cooperation and compromise between labor and management can be sufficiently achieved through labor-management councils or collective bargaining. In the survey, 68.5% of respondents said the labor director system would deepen the power imbalance favoring labor unions in labor-management relations. Lee explained, "These results suggest that experts are highly concerned that the power imbalance favoring labor unions, which has increased due to the recent ratification of the International Labour Organization (ILO) core conventions and amendments to the Labor Union Act, could be further exacerbated by the introduction of labor directors."

These economic organizations also stated, "The labor director system in public institutions may not enhance operational transparency but could instead encourage lax management and moral hazard in public institutions." They expressed concern that "the labor director system in public institutions will inevitably act as pressure for private companies to introduce labor directors, and the labor sector is already openly advocating for the application of labor directors not only in public institutions but also in private companies."

Looking at overseas legislative examples, only some European countries and socialist-based China have legislated labor director systems. According to a 2019 survey by the Organisation for Economic Co-operation and Development (OECD), only 14 out of 49 major countries surveyed legally mandate labor directors. Except for China, all 13 countries are European. Notably, countries like Germany and the Czech Republic, which have introduced labor directors, mandate labor director participation only on supervisory boards, which primarily oversee management, rather than on management boards responsible for key business decisions.

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