Forced Approval of Labor Director System... Business Community "Pressure to Introduce in Private Sector, Concerns Over Major Management Disruptions"

The Democratic Party convenes the full meeting of the Industry Committee today
"Include a labor representative as a standing director"
Parliament review report "Lack of expertise verification process, issues with board neutrality, etc."

On October 3rd, union members held a rally to block the new IBK Industrial Bank of Korea President Yoon Jong-won from going to work at the IBK headquarters in Jung-gu, Seoul, shouting slogans. Yoon, a former Blue House economic secretary, had even drafted a declaration to promote the labor director system after more than 20 days of the union's work-blocking struggle. Photo by Kim Hyun-min kimhyun81@

[Sejong=Asia Economy Reporters Moon Chaeseok and Lee Gimin] As the ruling party has decided to rush the passage of the Public Institution Labor Director System bill, voices expressing concerns about the backlash, including the strengthening influence of labor unions, are growing louder. The Labor Director System was one of the Moon Jae-in administration’s national agenda items, and President Moon promised during his candidacy that it would be "expanded to private companies." The business community is opposing the ruling party’s plan to push the bill through, arguing that it will hinder corporate activities.

According to the National Assembly’s Planning and Finance Committee on the 8th, there are three main bills related to the Labor Director System to be discussed at the plenary session that day. Kim Jooyoung, a member of the Democratic Party of Korea, proposed an amendment to the Act on the Management of Public Institutions that appoints labor directors as full-time directors and stipulates that if there are no non-standing directors on the executive recommendation committee, one labor representative shall be recommended. Park Jumin, also from the same party, has submitted an amendment that sets the term of labor directors to a maximum of five years and requires that one of the audit committee members be selected from among the labor directors. The bills contain substantial provisions ensuring the authority of labor directors in various processes of appointment and voting rights in executive recommendation committees and other management bodies. Kim Kyunghyup’s bill also includes a provision that at least one labor director recommended by employee representatives shall serve as a non-standing director.

Regarding the introduction of the Labor Director System in the public sector, the government stated that "the provisions can be revised and accepted," but a National Assembly expert committee’s review report pointed out that the verification process for expertise is insufficient and that the neutrality of the board of directors could be problematic.

The business community raised the concern that the power of labor unions could become even stronger. Since the current administration amended the Labor Union Act to ratify the International Labour Organization (ILO) core conventions, strengthening the strike rights of unemployed and dismissed union members (non-active union members), the introduction of the Labor Director System could further amplify the union’s voice in wage and collective bargaining (wage and collective agreement) processes. Especially considering that the Serious Accident Punishment Act, which allows for the punishment of CEOs in the event of industrial accidents, will be enforced from January 27 next year, and that the minimum wage is rising sharply from the 6,000 won range to the 9,000 won range, there are many concerns that the business community will struggle to handle the labor side’s bargaining power in collective negotiations. The labor community’s demands remain strong, including the need to address major issues such as the teacher and public official time-off (working hours exemption) system, the conversion of non-regular workers in the public sector to regular positions, and the expansion of the Labor Standards Act to apply to workplaces with fewer than five employees, which only adds to the business community’s worries.

The five major economic organizations?the Korea Employers Federation, the Korea Chamber of Commerce and Industry, the Korea International Trade Association, the Korea Federation of Small and Medium Business, and the Korea Federation of Medium-sized Enterprises?also issued a joint statement on the same day strongly opposing the ruling party’s legislation on the public sector Labor Director System. They argued that the introduction of the Labor Director System in the public sector will inevitably affect the private sector immediately, making it difficult for companies to respond. A representative from the Korea Employers Federation pointed out, "Looking at cases in advanced countries overseas such as Europe, the public sector leads overall labor-management relations and immediately influences the private sector. There are already bills submitted to our National Assembly applying management participation and labor director systems to the private sector, so the impact on the private sector is obvious." He added, "Our companies do not have many full-time directors, but if two or three labor directors from labor unions are included on the board, it could cause delays and distortions in board decision-making, such as attempting to resolve issues not settled in collective bargaining through the board."

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