"Tens of Billions in Union President Bonuses"... No Intervention Despite Turmoil [Real Estate AtoZ]

Union Members Push Back Against Performance Bonus for Union Heads
Increasing Calls for Local Government Oversight
Administrative Guidance from District Offices, Seoul City Regulations Lack Legal Force

Conflicts over performance bonuses for union presidents are erupting at various redevelopment project sites in Seoul’s Gangnam area. Disputes are intensifying over proposals to pay bonuses amounting to several billion won. Union members are calling for intervention from local governments or government ministries to mediate these conflicts, but the government’s stance is that “the issue of distributing a union’s profits falls within the private domain, making intervention impossible.”

Raemian Blestige, Gaepo-dong, Gangnam-gu, Seoul. Homepage capture

According to the redevelopment industry on September 24, the liquidation committee of Gaepo Jugong Complex 2 (Raemian Blestige) has placed an agenda item titled “Settlement of Redevelopment Project Costs and Resolution of Audit (Performance) Bonuses” on the table ahead of the liquidation general meeting scheduled for September 29. The second agenda item proposes paying 14.5 billion won to union members as liquidation payments, and selling one 84-square-meter unit-originally designated for general sale but now canceled-to provide performance bonuses to union executives and employees.

The liquidation committee explained, “Over the past 25 years, those who have served as project promotion committee members and chairpersons, union auditors and directors, union presidents, and liquidation committee members and chairpersons have made significant contributions by ensuring the successful progress of the project, maximizing profits, and increasing the assets of union members.” The committee added, “We will sell Unit 3005 in Building 212, whose contract was canceled due to ineligibility for general sale, in accordance with the recommendations of the Ministry of Land, Infrastructure and Transport and relevant laws, and pay the proceeds as bonuses to the liquidation committee’s executives and employees.”

The 84-square-meter unit proposed as a performance bonus for the liquidation committee chairperson and other executives is currently valued at between 3.5 billion and 4 billion won. In response, union members visited the Gangnam District Office, arguing that “paying the proceeds from the apartment sale as a performance bonus is excessive,” and requested that the district office exercise its supervisory authority.

One union member pointed out, “There is a cunning strategy at play here, exploiting the desire of union members to quickly complete the liquidation process in order to satisfy their own greed. They bundled together agenda items that should have been voted on separately, thereby ignoring the union members’ right to choose. Even considering the scale of the project, construction costs, and market price differences, a 4 billion won performance bonus is excessive.”

An official from Gangnam District Office stated, “The district office has no authority to supervise the distribution of remaining funds by the liquidation committee. However, we have recommended to the liquidator (former union president) that the agenda items be separated.” The official added, “The liquidator maintained that the proposal is legitimate, and it is difficult for the district office to judge whether the distribution of assets is right or wrong.” The official also noted, “We will conduct a legal review regarding whether the canceled unit should be resold or incorporated into the union’s assets.”

Some union members of Raemian One Pentas (formerly Sinbanpo 15th Complex) are also opposing the proposal to pay a performance bonus of 3.8 billion won to the union president. To prevent the payment of such a large bonus, they have requested the Ministry of Land, Infrastructure and Transport to exercise supervisory authority and have filed a petition to have the matter referred to the Seocho District Dispute Mediation Committee. The union has placed the agenda item to pay the president a 3.8 billion won performance bonus on the agenda for the general meeting scheduled for September 26.

Union members are opposing the payment of the bonus because lawsuits are ongoing, including a 20 billion won damages claim against Daewoo Engineering & Construction following the termination of a construction contract, and a lawsuit seeking to nullify the additional payment of 9.9 billion won in construction costs to Samsung C&T. They believe it is premature to pay the president’s bonus, as additional costs may arise in the future. Union members stated, “We do not know how much the final redevelopment project costs will increase, and the so-called ‘estimated 580 billion won’ project achievement attributed to the president has not been verified through accounting.” They also pointed out, “The president initially claimed not to seek a performance bonus, so this payment was not included in the management and disposal plan.”

Regarding this, the Ministry of Land, Infrastructure and Transport responded in July last year, stating, “It is appropriate to calculate and pay performance bonuses at a stage when income and expenditures from the project have been roughly finalized and profits can be confirmed, and to include the estimated redevelopment project costs in the management and disposal plan.” However, the ministry also said that the payment of performance bonuses to union presidents should be under the jurisdiction of local governments rather than the central government. A ministry official explained, “Compensation for union executives should be stipulated in the articles of association, so it is difficult for the ministry to interpret this matter. Even if a petition is received, it is forwarded to the local government.”

The Seoul Metropolitan Government prohibits the payment of separate performance bonuses to union executives in addition to wages and bonuses, but this is only a recommendation and does not carry legal force. Seocho District also maintains that the agenda item is not subject to referral to the Dispute Mediation Committee, and that internal union conflicts should be resolved through legal channels. A Seocho District official stated, “If the agenda item is approved at the general meeting, the only way to challenge it is through a lawsuit. It is difficult for the district office to impose sanctions, and we cannot dictate whether the union’s assets should or should not be distributed in this way. We see this as a private matter.”

Kim Yerim, an attorney at Law Firm Simmok, explained, “The clearest way to resolve issues that require a union general meeting decision is to vote down the agenda at the meeting itself. However, since administrative agencies lack a legal basis, it is difficult for them to take action beyond administrative guidance. If there are many union members in favor, it is hard to raise the issue, but there have been recent cases where agenda items proposing performance bonuses of 5 billion or 20 billion won were voted down.”