The tyranny of merit and the distribution of profit in the AI era

South Korean society is abuzz with news of extraordinary performance bonuses paid to employees at tech giants Samsung Electronics and SK Hynix. Reports of individuals earning hundreds of millions of won have fueled a fear of missing out, with many contemplating investment in these companies. The sheer scale of these bonuses, particularly within the semiconductor divisions, has intensified public discussion about fair compensation and the distribution of profits that significantly exceed the norm.

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The fact that Samsung Electronics’ managers and union leaders agreed to a plan to allocate 15% of operating profit, approximately 300 trillion won this year, as a performance bonus and to relax the per-person payment cap for bonuses further amplifies the importance of addressing these issues.

The core of the controversy lies not just in the rewards themselves, but in their extent and distribution. Samsung Electronics' agreement with managers and union leaders to allocate 15% of operating profit, an estimated 300 trillion won this year, as performance bonuses, and to relax per-person payment caps, has amplified the debate. This focus on semiconductor units and permanent staff has further complicated discussions about "fair compensation."

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Successful people tend to believe that their achievements were possible due to the hard work they put in and their individual capabilities.

Harvard professor Michael Sandel's concept of "The Tyranny of Merit" is invoked to question the prevailing notion that success is solely the product of hard work and individual capability. Sandel argues that successful individuals often overlook the role of luck and external factors, such as family background, educational opportunities, and systemic advantages, in their achievements. This perspective suggests that attributing success entirely to merit can lead to a lack of societal obligation and an unjust distribution of rewards.

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However, factors that are beyond one’s control, such as family background, educational opportunities, and the rule of “winners” over “losers,” play a major role in one’s success.

The article extends this critique to corporations, asserting that business performance is also heavily influenced by external elements like market conditions, policy environments, and technological shifts. Samsung Electronics and SK Hynix are presented as prime examples, benefiting significantly from artificial market conditions. The piece questions whether profit distribution should solely be based on internal metrics when external factors play such a crucial role in a company's success, implying that a broader societal perspective is needed to assess the justification of these massive bonuses.

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Sandel argues that it is unjust to distribute compensation based on factors beyond a person’s control.