[Interview] Legal Review of Samsung Performance Bonus Dispute...Experts Say "No Grounds for Third Union Injunction or Shareholder Lawsuit"

Labor Law Authority Jisoon Park, Professor
"Collective Agreement Takes Effect Upon Representatives' Signatures,
Cannot Be Overturned Later Due to Internal Voting Issues"

Commercial Law Expert Seong Moon, Attorney at Yulchon
"Dividend

Despite the series of injunction filings by Samsung Electronics’ third labor union and the shareholder group’s announcement of a lawsuit over performance-based bonuses, experts in labor law and corporate law have dismissed both arguments as lacking legal grounds. They explained that it is impossible to overturn a finalized collective bargaining agreement (CBA) due to internal procedural issues, and that interpreting performance-based bonuses as an infringement on dividend rights reflects a misunderstanding of accounting concepts.

Jisoon Park, Professor at Korea University School of Law and an expert in labor law, and Seong Moon, Attorney at Law at Yulchon LLC and an expert in corporate governance and commercial law, each made these points in an interview with The Asia Business Daily on the 29th.

Professor Park said that the injunction filed by the Samsung Electronics Labor Union Donghaeng (Donghaeng Union), which seeks to suspend the effect of the CBA, is highly likely to be dismissed. Since the official signing ceremony between labor and management took place on the 27th, the external legal effect of the CBA has already been established, and under the current labor law system, it is impossible to overturn it retroactively based on internal procedural issues. In particular, he noted that the union member vote is not a mandatory system stipulated by the Trade Union and Labor Relations Adjustment Act, but rather an internal procedure outlined in individual union bylaws. Therefore, any dispute over the validity of the agreement on this basis is unlikely to have legal merit.

Attorney Moon explained that the shareholder group’s claim of infringement on dividend rights confuses the accounting concepts of bonuses and dividends. He stated that since performance-based bonuses are treated as costs prior to the calculation of operating profit, they are a separate matter from distributable earnings. Regarding the assertion that the CBA linking bonuses to company performance is invalid for lack of a shareholder meeting resolution, he stressed that ordinary employees’ salaries and bonuses are neither subject to shareholder nor board resolutions, and therefore there is no basis for such a claim under commercial law.

"A finalized CBA cannot be overturned due to post-signing procedural issues"

Jisoon Park, Professor at Korea University School of Law.

Professor Park commented on the Donghaeng Union’s injunction filing, saying, “There is a high probability that the court will dismiss it.” He explained that since labor and management held an official signing ceremony on the 27th, the legal merit of the injunction itself has been extinguished.

Professor Park stated, “Under labor law, a CBA takes external legal effect the moment representatives of labor and management complete the official signing. Even if there were procedural flaws during the internal voting process, it is impossible to retroactively overturn or nullify a CBA that has already been validly established.”

Regarding the Donghaeng Union’s argument that excluding union member voting constitutes a critical procedural flaw, Professor Park pointed out that this overlooks the principle of exclusive negotiation rights under the Trade Union and Labor Relations Adjustment Act.

He explained, “The Samsung Electronics Branch of the Samsung Group Enterprise Union (enterprise union) secured a majority of all employees in April and, for the first time since the founding of Samsung Electronics, obtained exclusive bargaining representative status. Under current labor law, a majority union is granted the exclusive legal authority to lead the entire process of CBA negotiation and conclusion through the single bargaining channel procedure.” He emphasized, “The representative bargaining union is under no legal obligation to separately solicit or grant voting rights to the minority Donghaeng Union members.”

"Performance-based bonuses are costs incurred before calculating operating profit... Claims of dividend rights infringement reflect an accounting misconception"

Seong Moon, Attorney at Law, Yulchon LLC. Photo by Dongju Yoon doso7@

Regarding the shareholder group’s announced lawsuit, Attorney Moon drew a clear line, saying, “It is a rather unreasonable claim.” The Korea Shareholder Activism Group has argued that the agreement between Samsung Electronics’ labor and management to link bonuses to operating profit infringes on shareholders’ dividend rights.

Attorney Moon explained, “Performance-based bonuses are already treated as expenses before operating profit is finalized. Operating profit is what remains after deducting basic costs, including labor costs, from revenue, and after deducting taxes from that, you get net income, which is transferred to distributable earnings.” He continued, “The claim that dividends due to shareholders are being diverted to bonuses does not hold up in accounting order. The use of 10.5% of operating profit as a metric by labor and management merely applies a clear quantitative standard and cannot be seen as disguised dividends.”

Attorney Moon also disagreed with the logic that increased labor costs directly result in shareholder losses. He said, “Even if net income decreases somewhat due to the payment of bonuses, if the company increases its payout ratio, the actual dividend received by shareholders can even rise. If productivity improvements from performance-based compensation lead to a higher share price, shareholders stand to benefit even more.”

Addressing the claim that the absence of a shareholder resolution makes the agreement procedurally invalid, Attorney Moon emphasized there is no basis for this under commercial law. He stated, “Shareholder resolutions only apply to agenda items specified in the Commercial Act and the articles of incorporation. The payment of salaries and bonuses to ordinary employees is neither a matter for shareholder nor board resolutions, so claiming a violation of shareholder rights on procedural grounds does not stand.”

This content was produced with the assistance of AI translation services.