"Performance Bonus Negotiations Without Shareholder Approval Are Invalid"... Samsung Electronics Shareholder Group Issues Stern Warning to Labor and Management

"Performance Bonus Linked to Operating Profit Not Subject to Labor Dispute"

As Samsung Electronics and its labor union approach their final negotiations over the performance-based bonus system, shareholders have voiced strong warnings. They argue that finalizing a "performance bonus linked to operating profit" without a resolution at the general shareholders' meeting is legally invalid, and that the strike announced by the labor union constitutes a clear "illegal strike."

The Korea Shareholders Movement Headquarters and a group of Samsung Electronics shareholders (hereinafter referred to as the shareholder group) stated in a press release on May 20, "A strike demanding something other than wages lacks legitimacy." The shareholder group asserted that the union's demand to formalize a "performance bonus linked to operating profit" does not constitute a "determination of working conditions" that can be the subject of a legal labor dispute.

On the 23rd of last month, near Samsung Electronics' Pyeongtaek Campus in Pyeongtaek, Gyeonggi Province, officials from the Korea Shareholders' Movement Headquarters opposing the union's rally read a resolution statement during the Samsung Electronics Labor Union Joint Struggle Headquarters' rally. Photo by Yonhap News.

They cited as their core basis the Supreme Court ruling on January 29 regarding Samsung Electronics' performance bonus. At that time, the Supreme Court ruled that the occurrence and size of performance incentives linked to the economic value added (EVA) of each business division are more heavily influenced by a variety of factors that employees cannot control, such as the scale of capital, market conditions, and management decisions. As a result, these bonuses are not considered "wages" (compensation for labor), but rather "post hoc distribution of business performance."

The shareholder group stated, "A strike to force the distribution of operating profit—an area the judiciary has confirmed is not a wage—constitutes an illegal act that goes beyond the objectives guaranteed by the Trade Union Act," and called for the immediate withdrawal of the strike scheduled for the 21st. Furthermore, they warned that if the illegal strike causes disruptions to semiconductor production and damages corporate value, they will view this as a direct infringement on the property rights of third-party shareholders and will hold the leading parties civilly liable for damages.

They also criticized the labor and management for violating the Commercial Act by adopting such a system. "Actions that bypass the strict calculation structure for distributable profits and general shareholders' meeting procedures stipulated in Article 462 of the Commercial Act, thereby infringing on the shares that should belong to shareholders, constitute 'disguised illegal dividends,'" they said. "The very act of labor and management adopting such a method is a direct violation of the Commercial Act and constitutes an illegal negotiation."

Warnings regarding procedural legitimacy followed. The shareholders emphasized that performance-based bonuses linked to and accumulated from operating profit are matters related to the distribution of company profits and therefore must be resolved by the general shareholders' meeting under the Commercial Act. They insisted that neither a tentative agreement between management and the union leadership nor a ratification vote by union members can ever complete the necessary legal procedures.

They also called on management to fulfill its duty of loyalty to the company and all shareholders, urging them to halt any resolutions regarding performance bonuses linked to and accumulated from operating profit and to strictly comply with proper legal procedures.

The shareholder group warned, "If a wage agreement or collective agreement is concluded that enforces a performance bonus linked to operating profit without the resolution procedures of the general shareholders' meeting, we will immediately file for a preliminary injunction to suspend its effectiveness, as well as a lawsuit to confirm its invalidity." They added, "We will mobilize all lawful means within the judicial system, including the directors' right under Article 402 of the Commercial Act to demand cessation of illegal acts, to fundamentally block any company disbursement of funds based on such agreements."

Starting from May 21, the date of the announced strike, they plan to officially launch a nationwide shareholder mobilization and lawsuit participant recruitment process. They declared their intent to promptly and comprehensively initiate legal procedures—such as injunction applications, claims for damages, and shareholder derivative suits—against any announced illegal resolutions, illegal strikes, or illegal agreements.

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