[Exclusive] "Billions of Won" in Unregulated Union President Bonuses Spark Controversy... MOLIT Launches Nationwide Union Survey

Calls for Large Bonuses Trigger Internal Strife at Cooperatives
The Ministry of Land, Infrastructure and Transport Launches Nationwide Survey Across 17 Cities and Provinces
No Sanctions Under the Current Urban Maintenance Act

Recently, there have been a series of attempts at redevelopment sites to pay large performance bonuses to union presidents and other executives, prompting the Ministry of Land, Infrastructure and Transport (MOLIT) to launch its first-ever investigation into the situation. Since there are currently no legal mechanisms in place to regulate performance bonuses for union presidents under existing laws, there have been numerous cases of bonuses worth billions of won or the allocation of reserved lots at below-market prices. As a result, the government is reportedly considering possible countermeasures.

According to industry sources on July 2, MOLIT recently asked all 17 local governments nationwide to submit reports on the status of performance bonus payments to redevelopment and reconstruction union executives. Accordingly, the Seoul Metropolitan Government is collecting data from unions in all 25 autonomous districts as of July 2. An official from the city stated, "This is the first time MOLIT has requested such data," adding, "Since this involves legal matters, it appears the ministry is moving to review the issue as the competent authority."

Aerial view of Olympic Park Foreon in Gangdong-gu. Yonhap News Agency

MOLIT's move to conduct this survey comes as controversies over large performance bonuses continue to arise at redevelopment sites. Recently, the Olympic Park Foreon (formerly Dunchon Jugong) reconstruction union in Gangdong-gu, Seoul, attempted to pay a total of 4 billion won in performance bonuses to union executives, but the plan was scrapped due to resident opposition. In another case last year, the liquidation committee for the Raemian Blestige (formerly Gaepo Jugong Complex 2) union in Gangnam tried to use the proceeds from the sale of an 84-square-meter unit worth 3.2 billion won as performance bonuses for executives, but the liquidator and committee members were dismissed. Similarly, the Raemian One Pentas (formerly Shinbanpo 15th) union withdrew its plan to pay 5.8 billion won in performance bonuses to executives after facing backlash from union members.

The problem is that there is currently no legal means to curb excessive performance bonuses. The Urban Renewal Act does not contain any provisions restricting or defining the scope of additional performance bonuses for union executives. While the Seoul Metropolitan Government's standard administrative rules for redevelopment projects stipulate that no separate performance bonuses should be paid in addition to salaries and bonuses, these guidelines are not legally binding. Kim Jeongwoo, managing partner at Centro Law Firm, explained, "In reality, the decision to pay performance bonuses is made through a resolution at the union's general meeting."

The courts' interpretation of what constitutes excessive performance bonuses also remains unclear. In the past, the Supreme Court ruled on a lawsuit filed by members of the Acro River Park (formerly Sinbanpo 1st) union against their union, stating that a general meeting resolution to pay excessive performance bonuses could be invalidated if it was deemed unfair. At that time, union members filed a lawsuit citing procedural issues, as it was expected that ten executives, including the union president, would receive a total of 13 billion won in performance bonuses. The Supreme Court, focusing on the public nature of reconstruction projects, stated, "The payment of performance bonuses cannot simply be left to the discretion of a private association." On the other hand, in 2023, when members of the Raemian One Bailey (Sinbanpo 3rd and Gyeongnam Apartments) union filed a lawsuit against their union, the court ruled that a 1 billion won bonus for the union president could not be considered excessive given the additional benefits returned to the union.

Attorney Kim Jeongwoo stated, "The criteria for what constitutes excessive performance bonuses are ambiguous," and added, "Moreover, since unions are legal entities, there is room for debate over whether the amount of bonuses can be restricted against the entity itself."

The government has announced that it will first focus on fact-finding. A MOLIT official said, "We have recently confirmed, through media reports, several cases where unions paid large performance bonuses," adding, "The purpose of this request for information is to assess the current situation, and no decisions have been made regarding follow-up measures."

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