A series of pivotal events that will shape an internal dispute at Samsung Electronics (005930.KS) over performance pay gaps begins this week. The Device Solutions division, which handles semiconductors, will disclose detailed criteria for its special performance bonus this week, and next month Roh Tae-moon, president and head of the Device eXperience division, will hold a town hall meeting with all employees to address the situation. Preliminary third-quarter earnings, which will determine whether the company posts its first-ever quarterly operating profit of 100 trillion won, are also due, drawing attention inside and outside the company.
The Samsung Electronics chapter of the Samsung Group industrial (supra-enterprise) labor union recently notified members that "guidance on the DS special performance bonus will be provided in the last week of September, after the Chuseok holiday," according to industry sources on the 27th. The guidance is expected to include the method for calculating the treasury shares used for the bonus and specific payment criteria.
The DS special performance bonus was created under a wage agreement reached between Samsung Electronics management and the union in May, separate from the existing Overall Performance Incentive. It is funded with 10.5% of the DS division's operating profit. Of that amount, 40% is distributed equally to all DS employees first, with the remainder paid on a differentiated basis according to each business unit's performance. There is no separate cap, and the full after-tax amount is paid in treasury shares. Recipients can sell one-third of the shares immediately, while the rest is restricted from trading in equal halves for one year and two years.
A plan to use part of the special bonus for social contributions is also under discussion. A one-to-one matching arrangement, under which the company would match voluntary employee donations of 0.5% to 1% of their bonuses, is being seriously considered.
As compensation expands in the DS division, discontent over the pay gap is mounting in the DX division. To calm the situation, Samsung Electronics plans to hold a town hall meeting for DX employees next month, presided over by Roh. The session is expected to cover a wide range of topics, including the bonus gap, plans to turn around earnings in the smartphone, TV and home appliance businesses, a companywide artificial intelligence transformation, and strategies to strengthen global competitiveness. Donghaeng, the Samsung Electronics labor union whose membership is largely made up of DX employees, is calling for a companywide funding pool to ease extreme compensation gaps between business units that follow industry cycles. Management, by contrast, is holding to its existing principle of keeping performance funds separate by business unit.
With record earnings from the semiconductor upturn now feeding an internal dispute over performance pay, Samsung Electronics will announce preliminary third-quarter results early next month. Brokerages' average forecasts over the past month put the company's third-quarter revenue at 199.1189 trillion won and operating profit at 105.6443 trillion won, according to financial data provider FnGuide. If the forecasts prove accurate, Samsung Electronics will post a quarterly operating profit of more than 100 trillion won for the first time since its founding.
