`Union of State-run Company Demanded Secret Deal`

The union of a state-run company is alleged to have demanded a secret deal with management on a pay cut this year in return for high pay raises after the Lee Myung-bak administration leaves office in 2013.

A senior official at the Korea Deposit Insurance Corp. told The Dong-A Ilbo yesterday, “The union recently demanded that management sign a backdoor deal on raising pay more than 15 percent in 2013 in return for a pay cut of five percent this year, and get the deal notarized.”

He said management immediately rejected the union’s demand as irrational.

Many state-run financial institutions have suggested wage cuts in response to the government’s plan to create jobs. They include Korea Development Bank, the Export-Import Bank of Korea, the Korea Asset Management Corp., and the Korea Technology Fund.

Unions at certain state-run financial companies are said to have signed backdoor deals similar to that of the deposit insurance company. If the rumors are true, they will likely spawn a major backlash against the CEOs of such entities given the Lee administration’s planned reform of state-run companies.

Saying it could no longer afford to continue negotiations with the union, the deposit insurance company’s management chose to cut the pay of senior officials five percent while freezing salaries for mid to low-level staff. Company guidelines were also changed to effectively prevent staff from working overtime, work, and were put into effect Thursday.

Under the guidelines, allowing a staff member to work overtime will need approval by a manager as proposed by the staff, or a manager must instruct a worker to work overtime. Thus, the company effectively banned managers from approving or demanding overtime unless deemed essential.

On the alleged demand for the secret deal, the corporation’s union leader Seong Min-ho said, “The demand was accidentally suggested in negotiations and was not put into writing,” adding, “Since we tried to urge management to sincerely hold discussions, our demand might have been exaggerated to a certain extent.”

legman@donga.com jaeyuna@donga.com