South Korea Considers French Model for Performance Bonuses, Linking Payouts to Profits and Shareholder Input

South Korea is exploring a new framework for performance-based bonuses, drawing inspiration from a French case. Presidential policy advisor Kim Yong-beom stated that the country needs to establish rules for such compensation, which is currently unfamiliar territory. This comes as companies like Samsung Electronics and SK Hynix have begun offering bonuses tied to operating profits, prompting labor unions to demand a specific 'N% rule'.

Kim emphasized that companies achieving significant profits, particularly in sectors like Silicon Valley, have not traditionally shared operating profits with unions. Instead, these firms typically use individual incentive contracts. The government views the current situation, where shareholder and investor opinions are largely excluded from profit distribution for bonuses, as unreasonable. To address this, they are considering amendments to the Commercial Act and the Capital Markets Act to mandate board approval for bonus distributions.

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We need to create rules.

The government's stance is that performance bonuses should be viewed not just as a matter of labor-management negotiation, but as an issue of corporate profit distribution and shareholder rights. This proposed shift aims to create a more structured and equitable system for rewarding company performance, ensuring that all stakeholders' interests are considered.

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Companies that make huge profits in Silicon Valley have never had a rule where the union divides operating profits.