Gov`t and Presidential Office at Odds over Corporate and Labor-Management Policies

The Korea Fair Trade Commission (KFTC)`s corporate policies and Cheong Wa Dae`s labor-management policies are highly likely to collide, some pointed out. Others are worried that the core policy targets such as corporate transparency of the FTC and job security of the presidential office might all be damaged.

The corporate policy that the FTC is pushing for comes down to transparency of corporate governance and protection of shareholders` interests. It attempts to model after the corporate governance of the U.K and the U.S.

“Among the corporate models of the U.K.-U.S. and Japan-Germany, the country should accept the advantages of the first model, in which shareholders` meeting and the board of directors make essential decisions,” FTC Chairman Kang Chul-kyu claimed June 19 at an outside lecture.

The characteristics of the U.K.-U.S model are a priority on shareholders` interests, corporate transparency, maximization of profits, flexibility of layoffs and employment, and brisk M&A.

In the meantime, Lee Jung-woo, a presidential secretary for policies, explained July 3 a plan in which trade unions take part in the management. “The subjects of discussion can be providing management information to labor unions, as well as a decision-making process such as investment strategies and M&A.

This differs from the Dutch labor-management model to some extent. However, it also has some similarities in that labor unions` right to join the management is guaranteed in return for restraining their demands for higher wages.

The problem is that one side is pursuing reform of corporate structure to protect shareholders` right, while the other attempts to strengthen unions` right that can be at odds with that of shareholders.

Therefore, experts worried that the two targets of reform can come to nothing.

“If workers take part in the management, companies will block the route of information on purpose,” said Kim Kun-sik, a law professor at Seoul National University. “This will undermine corporate transparency, thereby leading to a collision with the current corporate policies,” he added.

Moreover, if that happens, the standard for assessment of corporate performance will blur since companies can have a hard time operating due to increased need for workers` welfare and rights. “The interest of workers lies in job security rather than the maximization of companies` profits. So, it runs counter to that of shareholders,” said Chung Gwang-sun, a professor at Joongang University.

Such labor-management relationship can hamstring companies in economic slowdown, in particular. In fact, the growth rate of the Netherlands is expected to plunge to minus this year, for the first time since 1982. The foreign investment in the nation fell 43 percent last year compared to a previous year.

“The dramatic decline of the Dutch economy is attributed to the difficulties in employment coordination,” The Wall Street Journal, a U.S. economic magazine, analyzed.

Employment itself is very likely to drop. “A vitalized participation of labor unions in the management decreases employment flexibility,” said Chang Se-jin, a professor at Korea University. “If it is hard to layoff workers, companies will reduce employment,” he stressed.

“A corporate structure and labor-management relationship cannot be separated,” an FTC official presented his personal views. “The European labor-management relationship is impossible to achieve in the U.K-U.S corporate structure,” he said.

Ki-Jeong Ko koh@donga.com