SK hynix bonus vote set for next week as shareholder approval adds new uncertainty

SK hynix's union and management have reached a tentative agreement to overhaul the company's performance-pay structure, shifting from an all-cash payout to a split of 40% cash and 60% stock. Because the deal revises an arrangement both sides agreed last year to maintain for a decade, the union will put the proposal to a full membership vote rather than the delegate vote used in previous rounds.

The shift toward paying a substantial portion of bonuses in shares has introduced a new variable: shareholder approval. With some shareholders recently arguing that prioritizing employee bonuses over shareholder returns could constitute a breach of fiduciary duty, investor sentiment has grown sensitive — and some employees say they feel uneasy about backing the tentative deal, fearing a related agenda item could be voted down at a general shareholders' meeting.

If SK hynix employees endorse the arrangement — under which a set percentage of operating profit is paid out as bonuses, with a large share delivered in stock — the broader industry debate over "operating profit percentage" bonus demands could enter a new phase. The government had previously floated the idea of requiring board or shareholder approval for such payouts as a check on the trend, which had been spreading among major conglomerate unions.

According to industry sources Friday, the SK hynix full-time workers' union will hold a ratification vote on the tentative wage and collective bargaining agreement Monday and Tuesday. The Icheon union (about 9,300 members) and the Cheongju union (about 6,700 members) will each participate; the agreement passes if more than half of all registered members cast ballots and a majority vote in favor.

SK hynix currently operates under a multiple-union structure, with three separate unions — the full-time workers' unions in Icheon and Cheongju, and a technical and office staff union — each bargaining independently with management. The Icheon and Cheongju full-time unions have traditionally ratified tentative wage agreements through delegate votes.

The Icheon union said it wanted "to seek a final decision through a vote of all members, not a decision by a small number of delegates," calling it "the most democratic and legitimate procedure for finalizing the outcome of the 2026 wage and collective bargaining negotiations." The Cheongju union posted the same notice.

With the full membership vote in mind, SK hynix management and union officials held an information session for employees Thursday to explain the tentative agreement. A union official was quoted as saying the union believed receiving part of the bonus in stock "would be more beneficial, as it aligns the interests and values of employees with those of shareholders."

Under the tentative deal, SK hynix employees would receive a 6.3% wage increase this year, along with a profit-sharing bonus paid 40% in cash and 60% in company stock. The share price used to calculate the stock portion will be the lowest closing price among three reference dates: the January earnings announcement date, the February cash bonus payment date and the April stock delivery date.

Because the stock component now exceeds half of the total bonus, the agreement also includes a new safeguard against share price declines. If the market value of the shares on the day after delivery falls below the total bonus amount originally promised, the company will pay the shortfall in cash. Next year's bonus may also be received entirely in cash on a one-time basis.

A key variable, however, is that distributing a portion of bonuses in treasury shares may require an additional step: shareholder approval at a general meeting. Under the revised Commercial Act, treasury shares a company acquires must in principle be canceled within a set period; using them for employee compensation or other management purposes on an exceptional basis requires the company to prepare a treasury share retention and disposal plan and obtain approval at a general shareholders' meeting.

That requirement has fueled anxiety among employees. Some worry that if shareholders reject the agenda item on the grounds that the bonus is excessive, the stock payout could be disrupted. Shareholders of both SK hynix and Samsung Electronics have recently filed complaints with police, arguing that distributing too large a share of corporate earnings to employees before adequately returning value to shareholders is improper.

The fact that the payment structure has changed just one year after labor and management agreed to maintain the profit-sharing calculation framework for a decade is also a factor that could sway the vote. With stock compensation now making up a larger share of the total, the actual value employees receive will fluctuate with the share price — a consideration likely to divide opinion on the tentative agreement.

The union had previously pressured management, saying SK Group Chairman Chey Tae-won needed to make a decisive call and warning it would "fight" if management continued to avoid one. After marathon negotiations over the Saturday-to-Monday holiday period, however, the two sides produced the current tentative agreement.

A senior union official was recently quoted at a public event as saying that while bargaining used to be a one-on-one affair between the union and management, "now we are watching public opinion, the broader public and even the government, which makes negotiations considerably harder." The formation of a new "integrated union" spanning all job categories by members dissatisfied with the existing union's approach is also believed to have added pressure.

As the "operating profit percentage" bonus demand spread among major conglomerate unions, the government raised the possibility of requiring shareholder or board approval for such payouts as a regulatory fix. The Financial Services Commission and the Ministry of Justice — the agencies responsible for any legislative changes — have taken a cautious stance, however, and experts have questioned the practicality of the proposal, leaving the discussion without clear progress.

Observers note that if SK hynix — the company that effectively started the "operating profit percentage" bonus trend — moves away from all-cash compensation and naturally builds in a mechanism for shareholders to weigh in on the process, the government's rationale for imposing a separate mandatory rule could weaken considerably.