"Samsung Group Union's Demand for Operating Profit-Linked Bonuses Violates Corporate Law Principles"

Shareholder Action Research Institute Holds Panel on the 15th
Criticism of Union's Demand for Operating Profit-Linked Bonuses

Experts have raised criticisms that the labor unions of Samsung Electronics and Samsung Biologics recently demanded a “fixed performance bonus linked to operating profit,” claiming that it directly contradicts the legal principles governing corporations. They argue that, in situations where shareholders bear the full risk of losses, the union’s demand for a guaranteed share of surplus profits creates an asymmetrical structure that could undermine shareholder rights and the long-term growth drivers of the company.

The Shareholder Action Research Institute (SER) held an expert panel discussion on the 15th at the Korea Press Center in Jung-gu, Seoul, under the theme “Recent Strike Issues from a Shareholder Perspective: Focusing on the Samsung Group Case.” The event brought together experts from various fields, including law, economics, and business management, to discuss the impact of labor union disputes at Samsung Electronics and Samsung Biologics on the companies and their shareholders. The experts expressed concern that union-led industrial actions and demands for profit distribution could infringe upon shareholder rights and undermine industrial competitiveness.

The Shareholders Action Institute (SER) held an expert roundtable on the 15th at the Korea Press Center in Jung-gu, Seoul, under the theme "Recent Strike Issues from a Shareholder Perspective: Focusing on the Samsung Group Case."

Kwon Jaeyeol, professor at the Graduate School of Law at Kyung Hee University, delivered a strong critique of the union’s demand for fixed, operating profit-linked performance bonuses. Professor Kwon pointed out, “Forcing a certain percentage of operating profit to be paid through collective bargaining means that shareholders bear the risk of loss while employees secure a fixed portion of the profits.” He added, “This effectively elevates employees to the status of residual claimants of the company, which directly conflicts with traditional corporate law principles.”

Experts also warned about the potential damage of strikes in high-tech industries such as semiconductors and biotechnology. Kang Seunghoon, professor of bio-pharmaceutical engineering at Inha University, emphasized, “In biopharmaceutical processes that handle living cells, continuity is vital, and any process disruption leads directly to the production of low-quality medicines.” He noted, “Given the characteristics of the contract manufacturing (CMO) industry, frequent disputes and resulting supply interruptions could damage trust with global pharmaceutical companies and ultimately lead to long-term market exit.”

Song Heonjae, professor of economics at the University of Seoul, examined the cost of strikes in the semiconductor industry from a structural perspective. Professor Song stated, “Due to the 24-hour nature of semiconductor production lines, the departure of key personnel and resulting halts make it impossible to avoid losses of trillions of won, as costs for restarting operations and defect rates rise.” He suggested, “As seen with Taiwan’s TSMC, which maintains a non-unionized management style but still allocates 10% of net profit as performance bonuses through the board of directors, there is a need for a structural design that allows workers to share in corporate performance while also bearing responsibility.”

Proposals were also made to address the limitations of current law and to strengthen governance for shareholder protection. Lee Seunggil, chairman of the Korea ILO Association, remarked, “Semiconductor production lines, which are national strategic assets, are not classified as essential maintenance work under current law, so replacement workers are not mandated during strikes.” He argued, “Given the ripple effects of strikes on global supply chains and the national economy, we need to reconsider the current uniform approach to union law regulation.”

Jung Mugwon, professor at Kookmin University Business School, called for a long-term overhaul of performance-based compensation systems. Professor Jung commented, “If structurally transferring surplus cash to employees becomes standard practice at companies where large-scale upfront investment is essential, it will create severe conflicts of interest with shareholders who are betting on future growth.” He added, “Performance compensation standards should be linked to increases in free cash flow (FCF), not just operating profit, and combined with stock-based compensation (RSU), so that both employees and shareholders can share the goal of enhancing long-term corporate value.”

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