The Korea Employers Federation recently sent a special advisory to its member companies, stating that union demands for performance bonuses tied to a fixed percentage of operating profit do not constitute a legitimate subject of collective bargaining. Citing Supreme Court precedent, the KEF said profit-sharing arrangements whose payment and scale vary with business performance do not qualify as wages, and that setting the criteria for distributing corporate earnings through a collective agreement falls within the domain of management judgment. Because the subjects of collective bargaining under the Trade Union Act are limited to working conditions — wages, working hours and welfare — the KEF argued that industrial action aimed at securing a share of operating profit also raises questions of legality. It marks the first time the business community has publicly challenged the "N% of operating profit" demands spreading across the industrial sector.
The demands now coming from major conglomerate unions look markedly different from those of the past. Beyond wage increases and welfare expansion, unions are now asking for a direct share of corporate profits. After SK Hynix paid out performance bonuses worth hundreds of millions of won, Samsung Electronics agreed — following negotiations with its union — to use a portion of operating profit as a bonus pool, and the "N% of operating profit" demand has since spread across industry.
The Kakao union secured the right to strike after demanding 13 to 14 percent of operating profit, while unions at HD Hyundai Heavy, LG Uplus and Kia are each demanding that 30 percent of operating profit be distributed as bonuses. The Hyundai Motor union has similarly called for 30 percent of net profit. That the compromise Samsung Electronics chose under the threat of production disruptions has now become a precedent is a regrettable development.
The expansion of union demands into management prerogatives is not unrelated to the enactment of the so-called "Yellow Envelope Act" — the amendment to Articles 2 and 3 of the Trade Union Act. The revised law, which took effect in March, broadened the definition of employer and widened the scope for unions to demand bargaining over management decisions that affect working conditions. Unions are now pushing not only for a percentage of operating profit but also for veto power over business unit sales, direct negotiations with prime contractors, and advance consultations on AI adoption and the deployment of robots on production lines. The concern raised when the bill was passed — that the boundary between management judgment and working conditions would blur — has become reality. The encroachment on management rights and shareholder authority is substantial, and it risks chilling the autonomous decision-making companies need.
Sharing the fruits of strong earnings with employees is both reasonable and necessary, but operating profit is also the source of investment for future growth. Companies cave to union demands to avoid the cost of strikes, and other unions then treat each settlement as a new floor from which to demand even more — a cycle that keeps repeating. This is not something the government can afford to leave alone under the banner of labor-management autonomy. It needs to set out clear standards defining what constitutes a legitimate bargaining subject and what falls within management judgment. Uncertainty and the cost of conflict on the shop floor will ultimately suppress investment and employment, and the burden will fall on the country's competitiveness.
meelee@heraldcorp.com
