A newly proposed wage agreement at **Samsung Electronics**, including a controversial bonus scheme linked to operating profit, is now facing significant legal challenges. A prominent shareholders’ group announced Thursday that it plans to pursue legal action, claiming the new compensation structure violates Korean corporate law.
The **Korea Shareholder Action Headquarters** escalated its opposition by holding a rally near the residence of **Samsung Electronics Chair Lee Jae-yong**. The group contends that specific clauses within the **labor-management agreement**, signed just the day before, could contravene **Korea’s Commercial Act**, raising concerns for investors.
In a formal statement, the shareholder group declared, “The provision to accumulate and distribute 12 percent of pretax operating profit is unlawful.” They emphasized, “This agreement lacks the necessary approval through a shareholders’ meeting resolution, rendering it legally invalid and a potential breach of corporate governance.”
**Samsung Electronics** and its labor unions had previously signed the tentative **wage agreement** on Wednesday at the Gyeonggi Regional Employment and Labor Office in Suwon. This move had temporarily assuaged fears of a major strike, though the agreement still requires final ratification from union members.
The core of the dispute revolves around a revised **bonus formula**. This formula merges 1.5 percent of operating profit from Samsung’s existing overall performance incentive program with an additional 10.5 percent from a newly established special management performance bonus. Collectively, this creates a bonus pool equivalent to approximately 12 percent of the company’s operating profit.
The shareholder advocacy group highlighted that this formula is fundamentally flawed because it is based on **pretax operating profit**. This calculation occurs before crucial financial determinations like taxes, investment allocations, and shareholder-approved profit distributions have been finalized, potentially impacting shareholder value.
Beyond the primary bonus formula, the group also voiced strong criticism regarding several other provisions within the **labor agreement**. These include the removal of existing caps on performance bonuses, the payment of bonuses entirely in **Samsung Electronics shares** (after taxes), a one-year deferral in applying penalties to underperforming business divisions, and a new joint labor-management process for defining business performance criteria.
While acknowledging that **stock-based bonus payments** could potentially enhance procedural transparency, the group underscored that this arrangement fails to address what it identifies as the central legal issue: the reliance on **pretax operating profit** as the basis for employee compensation and profit sharing.
The organization issued a stern warning, stating that the **Samsung Electronics board** could face considerable **legal liability** should it approve or implement this agreement. They argue that such a deal could effectively redirect funds that should otherwise be allocated for **shareholder dividends** or essential future investments, undermining investor interests.
Furthermore, the group raised the serious possibility that the company’s directors could face accusations of breaching their **fiduciary duties**. This includes their fundamental duty of loyalty to the company and its shareholders, as well as their duty of care in managing corporate affairs.
To challenge the agreement, the shareholder group confirmed its intention to file a lawsuit. This legal action will seek to invalidate any board resolution that approves or executes the agreement and will also pursue an injunction aimed at blocking the implementation of the contentious **bonus scheme** altogether.
The group also issued an additional warning: should union members reject the tentative agreement and proceed with a strike to demand a new **operating profit-linked compensation system**, the **Korea Shareholder Action Headquarters** may seek damages against the responsible union leaders and participating members.
“Effective today, the **Korea Shareholder Action Headquarters** and dedicated **Samsung Electronics shareholders** will commence immediate mobilization efforts, uniting shareholders nationwide,” the group concluded, signaling a prolonged and determined legal battle.
yeeun
