Just 12 of Top 30 Companies Pay Settlements in Cash

Just 12 of Korea’s top 30 companies pay settlements all in cash, while 11 including Samsung Electronics, LG Electronics and Hyundai Steel still use promissory notes.

This is according to the results of a Dong-A Ilbo survey on the settlements of the country’s top 30 companies based on last year’s sales. Twelve companies, including SK Energy, POSCO, GS Caltex and Shinsegae, paid all in cash.

Among those using promissory notes, six including Samsung Heavy Industries, Samsung Corp., GM Daewoo, Hyundai Engineering and Construction, Hyundai Steel and LG Display paid small and mid-size suppliers with postdated bills.

Large companies are under fire for not keeping their promise to pursue co-prosperity with smaller companies. Among those using promissory notes, several have hundreds of billions to more than 1 trillion won (850 million U.S. dollars) in cash reserves.

Because of this, government criticism of the payment methods of large companies has gained more support. Strategy and Finance Minister Yoon Jeung-hyun said in July, “Large companies that have tens of trillions of won in cash on their hands should ask themselves why they are still paying promissory notes to suppliers.”

Leading companies under conglomerates such as Samsung, Hyundai and LG were included in the group paying promissory notes to small and medium companies, according to the survey’s findings. These conglomerates had announced plans for mutual development with smaller companies and said they would pay cash to their parts suppliers.

Hyundai Motor, Hyundai Heavy Industries and five other companies said they used alternative payment methods such as corporate purchasing cards or corporate purchasing fund loans. These are practically the same as promissory notes, however, since they can be converted into cash only 60 days after they are paid and commissions of an annual 5-6 percent must be paid to banks until then.

buddy@donga.com tesomiom@donga.com