[Initial Perspective] For Those Who Did Not Receive Performance Bonuses

[Asia Economy Reporter Oh Hyung-gil] Performance bonuses are a hot topic. Bonuses given to employees based on a company's annual performance attract attention around this time every year. People tend to be more curious about the bonuses others receive rather than their own. There is curiosity about which company gave the highest bonuses, and companies that provide generous performance bonuses tend to gain favor. According to a survey conducted by a research institute targeting companies, 6 out of 10 respondent companies either paid or planned to pay performance bonuses. This shows how familiar the performance bonus system has become to us.

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The main reason companies give performance bonuses is to boost employee morale (63.8%). Other reasons include achieving performance targets (49.2%) and talent management (26.6%). Performance bonuses act as carrots that raise employee morale and motivate them to pursue goals. They are also a means to secure and retain key talent.

However, this year, companies that paid large performance bonuses are facing criticism. This is especially true for the financial and petroleum industries. After enduring the triple economic crisis of high interest rates, high inflation, and high exchange rates last year, performance gaps widened significantly depending on the industry. These companies all recorded record-breaking profits and are being criticized for holding lavish performance bonus celebrations.

The total amount of performance bonuses paid by the five major commercial banks reached 1.3823 trillion won, an increase of 362.9 billion won from the previous year's 1.0193 trillion won. This represents about a 35% increase in total performance bonuses within a year. While most citizens are struggling with loan interest and household debt due to rising interest rates, the banks that profited from these interests are facing resentment over their performance bonuses. The petroleum companies are in a similar situation. With oil prices soaring due to the Russia-Ukraine war, they enjoyed trillions of won in profits. News that petroleum company employees received performance bonuses exceeding 1000% of their base salary has enraged ordinary citizens who have suffered from skyrocketing fuel prices.

The common factor among these companies is that they enjoyed a boom due to external management variables such as rising crude oil prices or interest rates. While this does not diminish the efforts of employees who worked diligently, criticism toward these companies is growing louder. On the 13th, President Yoon Suk-yeol also stated, "The high interest rates of banks are causing great pain to the people. The Financial Services Commission should prepare related measures to prevent public resentment caused by banks' money celebrations." It is expected that measures to return part of the profits to society will be introduced.

Behind this phenomenon lies the perception that corporate performance is disconnected from the lives of ordinary people. While the legitimate profits of companies pursuing profit should be socially respected, sharing corporate performance with members should also be encouraged. However, this opportunity should also serve as a chance to reconsider the social role of companies.

Even within the same company, some departments receive performance bonuses while others do not. Some employees express psychological deprivation due to the polarization of performance bonuses. For example, Samsung Electronics’ Device Solutions (DS) division, responsible for semiconductors, received over 50% of their annual salary as an Over-Profit Incentive (OPI), while the home appliances division, which posted a loss for the first time in seven years, received only 7%.

LG Energy Solution, now the second largest by market capitalization, once had times when performance bonuses were not even expected, and the company failed to produce results. After years of research without concrete outcomes, it posted losses of about 200 billion won. The battery business was treated as a burdensome responsibility that no management wanted to take on, and performance bonuses were unimaginable. However, over time, the company has grown to the point where it now pays performance bonuses amounting to 870% of the base salary. Behind this growth are the management and employees who quietly focused on their work without performance bonuses at that time.

Fair compensation for performance will become increasingly important now and in the future. However, while celebrating immediate achievements, it might be worthwhile to reevaluate companies or departments that did not receive performance bonuses from a long-term perspective. Who knows? That department might be the one to sustain the company in the future.