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- STRIKINGLY HIGH BONUSES
What’s the Story?
In April and May this year South Korean unions organised a 40,000 staff walkout at Samsung in protest at capped bonus and restricted stock awards.
Samsung is one of two main chip producers worldwide supporting the AI novation of the global economy with huge demand driving Q1 operating profits to $38.6BN.
The unions claimed that bonus and share plan rewards were unjust and not a true reflection of the value of skilled worker contribution.
Samsung was also caught flat footed by rival chip maker SK Hynix; where broad employee bonuses and share plan values exceed three times the Samsung offering.
The Spring industrial unrest resulted in an agreement that the workforce should get 10.5% of the semi-conductor operating profits.
This rejigged bonus structure averages over $400,000 a head for the sections most highly rewarded, with tiered down major benefits for those also contributing.
Why Does it Matter?
The new Samsung Bonus and Restricted Stock pool is huge. Some 10.5% of $38.6BN is a pool a shade over $4BN. If all four quarters are similar, an annual pool of c. $16BN results.
Among 76,000 employees, the unions achieved bonus rights of $213,000 a head. Note that is on top of base pay and benefits. A nice pay day indeed.
Samsung have internal tensions as a result. The chipmaker division is the star, with others feeling less privileged; and much less well paid.
Unions worldwide should take note and start planning strongly how to agree deals on equity compensation and share plans.
Newspoint view
Deep rethinking of union role and impact is needed in the West. The old style protect jobs and demarcation rights aims are worthy - but now much outdated.
More important by far is negotiating for employees participation in the huge rise in future profits which will be seen in many industries around the globe as the productivity impact of AI accelerated in upcoming years.
A big cash based profit share is welcome, but true and meaningful employee equity ownership is needed for workers to be co-owners of future wealth.
Society worldwide has deep wealth and income inequalities. Inequality will risk steeply as AI and other technical developments generate huge amounts of new value. But equity compensation and employee share plans should be positioned to claim a just slice of the upside.
Union ambitions need to be both bold and novel. In a fast moving world of technology and AI not all jobs can be protected. Better to demand a soft landing for those displaced and a bright future for those re-tasked in new formats. Delivered through equity compensation.
Companies should welcome this - the deal must include re-framing jobs, re-tasking talent and smoothing the headcount cuts needed to create vast new shareholder value. Share plans are not just a cost, but a powerful value creation tool.
CORPGRO can help: Are your share plans delivering strategic value?
Too many companies treat share plans as another line item in the remuneration package – a necessary cost to stay market competitive. That misses the point entirely. Properly designed share plans are strategic tools that can reshape behaviours, drive transformation, retain critical talent, align employees with shareholders and accelerate value creation. If your share plans aren't helping you achieve your business strategy, they're not working hard enough. Get in touch with CORPGRO to explore how equity compensation can become a genuine driver of long-term performance and competitive advantage.
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