KEF Pushes Back Against Bonus Controversy, Says Profit Sharing Is Not a Bargaining Issue

The Korea Enterprises Federation (KEF) has issued a special recommendation for management in response to recent demands from labor unions at some major conglomerates for a share of operating profits, saying the issue cannot be treated as a subject for collective bargaining.
On the 31st, KEF distributed its 'Special Recommendation for Management on Labor Unions' Demands for Corporate Profit Distribution' to member companies. It said some labor unions at major conglomerates have recently been demanding that a system distributing a fixed share of operating profits to union members be written into collective agreements, adding that such demands are fundamentally different from existing bonus systems and amount to a request for the direct distribution of corporate profits.
KEF first rejected the idea that performance bonuses should be considered wages. It explained that the Supreme Court of Korea has consistently ruled that performance-based distributions, whose payment and amount vary depending on management results, are not included in the wage category because they are not closely tied to the provision of labor and are more heavily influenced by other factors that workers cannot easily control.
It also stressed that if a labor union demands profit sharing in negotiations by treating it as a form of wages that must be paid by default, management should clearly point out that such a demand does not align with the law or court precedents.
KEF also drew a line on whether the issue falls within the scope of collective bargaining. It said mandatory bargaining items under the labor union law are limited to working conditions such as wages, working hours, welfare, dismissal, workers' status and other treatment, and that corporate profit sharing is generally neither wages nor something that can be regarded as welfare or other treatment.
It added that companies have no legal obligation to comply with labor unions' demands for corporate profit sharing, and that strikes or other industrial actions aimed primarily at securing such profit sharing could generally be deemed unlawful in purpose.
KEF also made clear that corporate profits are a management resource. It said profits should be used for investment, hiring, research and development, and improvements to financial structure in order to secure sustainability and future competitiveness.
It warned that labor unions' demands for the preemptive distribution of corporate profits could end up restricting shareholders' rights.
KEF said it is difficult to find cases among major global companies overseas where a fixed share of profits is contractually promised to workers in advance.
The federation also offered guidance on how bonus systems should be operated. It said bonuses should be managed within a range that does not undermine a company's long-term competitiveness or investment capacity, and should be used not as a simple profit-sharing mechanism but as a compensation tool that encourages higher worker productivity and stronger corporate performance.
It added that conditional stock compensation, rather than short-term cash-based rewards, is preferable because it better aligns the long-term interests of both the company and its employees.
eastcold@fnnews.com Kim Dong-chan Reporter