Kim Young-hoon's 'excess profit sharing' proposal ignites labor-management battle

A labor-management dispute ignited by Employment and Labor Minister Kim Young-hoon's call for "social sharing of excess corporate profits" is intensifying.

The Korean Federation of Trade Unions, known as KFTU, on Sunday fired back at the Korea Employers Federation, or KEF, after the employers' group issued a special advisory to its member companies arguing that demands for profit distribution should be excluded from collective bargaining. KFTU called the advisory "an anachronistic attempt to shut down any discussion of profit sharing." KEF had distributed the advisory to members on Saturday.

The controversy began when Minister Kim raised the idea of socially sharing excess profits generated by large conglomerates — at a press briefing on May 27 and in a television interview on May 29. Using the semiconductor industry as an example, Kim said social dialogue was needed to narrow the gap between large prime contractors and their suppliers and to strengthen the competitiveness of the broader industrial ecosystem.

In a statement Sunday, KFTU demanded that KEF withdraw what it called an "anachronistic advisory" aimed at removing profit distribution from the scope of collective bargaining, and accused the employers' group of "deliberately conflating the question of bargaining scope with legal arguments about wage classification."

KFTU said unions are not simply demanding a share of profits but seeking to negotiate the criteria by which workers participate in the value a company creates. The federation argued that performance bonuses, welfare benefits, job security, education and training, and stock compensation plans are all already determined through labor-management bargaining in practice — and that profit sharing should be no different.

On KEF's claim that operating profit distribution cannot be a bargaining subject because it does not constitute wages, KFTU said "whether performance pay qualifies as wages and whether labor and management can negotiate the criteria for profit sharing are two entirely separate questions."

The two sides also revealed sharply different readings of the Trade Union and Labor Relations Adjustment Act. KFTU argued the law does not confine mandatory bargaining subjects to the formal concept of wages alone, and that any matter affecting workers' economic and social standing can qualify as a legitimate bargaining subject.

The dispute extended to international comparisons. KFTU cited Germany's co-determination system, France's statutory profit-sharing regime, and profit-sharing schemes at companies across the United States and Europe, saying "it is hard to find a country that treats profit sharing itself as taboo."

KEF distributed its "Special Management Advisory on Union Demands for Corporate Profit Distribution" to member companies on Saturday, responding to moves by unions at some large conglomerates to enshrine in collective agreements a requirement that a fixed share of operating profit be paid out to union members.

KEF argued that demands tied to operating profit are fundamentally different in character from existing performance bonus systems. While performance bonuses are paid at a company's discretion based on its business conditions and results, institutionalizing a predetermined share of operating profit as a mandatory payout amounts to unions claiming a direct stake in corporate earnings, the group said.

KEF cited Supreme Court precedent from this year to support its position that operating profit distribution and management performance bonuses do not constitute wages. Performance-based payouts whose amount and timing vary with business results are not direct compensation for the quantity or quality of labor provided, it said.

KEF particularly stressed that mandatory collective bargaining subjects under the trade union law are limited to working conditions — wages, working hours, welfare, dismissal and workers' treatment — and that profit distribution falls outside that scope. Employers therefore have no legal obligation to bargain over it, and strike action aimed at securing such distribution could be found unlawful on grounds of purpose, the group said.

KEF also said corporate profits are a management resource that should go toward investment, employment, research and development, and balance-sheet improvement. In industries such as semiconductors, batteries and automobiles — where large-scale preemptive investment is essential — mandating that a fixed share of profits be distributed in advance could weaken corporate competitiveness and investment capacity, it warned.

The debate has grown beyond a dispute over performance pay into a broader disagreement — inside and outside the government — over what should be done with the profits generated by the semiconductor boom. Labor groups and the Ministry of Employment and Labor have emphasized narrowing the gap between prime contractors and suppliers and sharing the gains with workers, while the trade and fiscal authorities have leaned toward channeling excess profits and windfall tax revenues back into future industrial investment.

Minister of Trade, Industry and Energy Kim Jung-kwan wrote on Facebook on May 29 that "this is a critical moment to channel the profits generated by the semiconductor industry into productive reinvestment for the future," adding that South Korea must "strategically leverage the AI boom to secure the growth engine for a great industrial leap." His post framed the semiconductor windfall as a lever for corporate investment and advanced-industry competitiveness.

The fiscal authorities struck a similar tone. Deputy Prime Minister and Finance Minister Koo Yun-cheol said on the YouTube channel "Three Pro TV" on May 30 that South Korea must "boldly invest in the next memory chip" when asked how windfall tax revenues from the semiconductor boom should be used. Minister of Planning and Budget Park Hong-keun said the same day that the country should "invest boldly in advanced industries and future growth drivers, while also investing in the social safety net to address the social inequalities that result."

Employment and Labor Minister Kim Young-hoon struck a different note, leaving a comment on Minister Kim Jung-kwan's Facebook post that read: "Let's create real growth together with labor through the co-prosperity of partner companies."

Meanwhile, an emergency forum that Minister Kim Young-hoon had planned to hold Sunday to explore the feasibility of a Korean-style solidarity wage has been postponed. The forum is not expected to take place until after Kim returns from a trip to the International Labour Organization next week.