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South Korea's great salary divide
Publication Date : 11-04-2014
The recent unveiling of the multi-billion won salaries that registered board of directors at Korean companies took home seems to have shaken many, including myself.
But as I was unsure of exactly how to see it, I asked many about their views, and the answers varied quite a bit depending on each person’s circumstances.
An ajumma friend in her late 30s who had never worked at any kind of business enterprise was in awe, saying she could not imagine how someone could be paid that much, adding she would not be sure how to even spend it.
A self-employed friend who runs a chicken and beer joint commented that the money was not worth it, saying that with the exception of people like Chey Tae-won of SK and Kim Seung-yun of Hanwha who actually own the firms, they had all sold their souls.
“These people are strangers in their own house because home is where they sleep and that’s about it. Their lives are devoted to the company that owns them,” he said.
A 50-something ajeossi ― a former executive himself ― said he was glad because it meant that his son has something to look forward to at work.
“The myth of the salaryman still exists. You work hard enough, and you get compensated. What’s the point of spending all your time at work when you don’t have a fat pay package to look forward to?” he asked me, perplexed at why people would be upset at the news.
A friend of a colleague who frequently volunteers at civic groups fumed, saying the gap was unacceptable.
“There are people out there who are dying because they don’t have 800,000 won (US$77,000) a month, and people like Chey Tae-won are making 80 million won a day. This is mad,” he said.
An employee working for a multinational firm said he wasn’t sure what the fuss was about since the salaries to the directors are decided by the shareholders.
“If the shareholders aren’t complaining, then I don’t see what the problem is, do you?”
Yes, what is the problem?
The salaries of the registered board members are about 14 times higher than those of average employees at listed Korean firms. The ratio is about 20:1 in France, 22:1 in the U.K. and 20:1 in Canada. In the US, the ratio shoots up to 475:1, so Korea actually isn’t doing too badly given the size and status of its economy.
However, there are many factors to consider, such as that in many of the Western companies they still hand out stock options, whereas in Korea few companies do. Some companies refuse to even hand out dividends ― such as Microsoft ― saying the value of the stocks more than compensates.
At the same time, Korean companies tend to be stingy about dividends, which has landed it last on the list of OECD nations in terms of dividend profit.
Some experts say this corporate culture is the cause of the so-called “Korea Discount” in the local bourse. It also doesn’t sit well with the shareholders.
The bottom line is, there is no one way to look at this issue.
For now, all it does is offer a glimpse into exactly how wide the salary divide is. And remember, the list doesn’t even include the real big shots such as Lee Kun-hee of Samsung Group.