Government Reviews Requiring Shareholder Approval for 'N% of Operating Profit as Performance Bonus'

The government is considering requiring shareholder approval for the practice of paying a certain percentage of operating profit as performance bonuses. The measure is being reviewed not simply as a labor-management issue, but as part of an examination of companies' overall allocation structures. On the surface, the government says it is reviewing the system to protect shareholder rights and secure corporate management stability.

Alongside this, discussions are continuing over who should receive the excess profits generated by the boom in artificial intelligence and semiconductors, and according to what criteria they should be distributed. The method of distributing excess profits is being cited as a source of tension between worker compensation and shareholder returns. An interpretation has also emerged that the government's review reflects its concerns over these allocation issues.

Recently, labor and management at Samsung Electronics and SK hynix each agreed to use around 10% of operating profit as a funding source for performance bonuses. There are reports that the agreements at the two companies are creating a trend that is spreading across the industry. Within the industry, concerns have been raised that the expansion of performance-bonus systems could become intertwined with company-specific management and corporate-governance issues.

The government’s consideration of making shareholder approval mandatory is being viewed as a process of newly defining the norms between corporate compensation policies and shareholder rights. Specific legislation and an implementation date have not yet been disclosed. Related discussions are expected to emerge in earnest during upcoming shareholder meeting seasons and in corporate disclosures.