Abolishment of the 1,000% Base Salary Cap
Option to Choose Up to 50% in Company Stock
SK Hynix is reinstating its "Shareholder Participation Program," which links a large-scale performance bonus with an employee stock purchase option. Following last year, the company plans to offer stock options as part of the January performance bonus this year as well, aiming to establish a compensation system tied to corporate value that goes beyond simple cash rewards. However, unlike last year, there is a possibility that the program could be scaled back or canceled due to the pending amendment to the Commercial Act.
According to industry sources on January 16, SK Hynix announced its plan to implement the Shareholder Participation Program through an internal notice the previous day. The application period runs until January 22.
The Shareholder Participation Program allows employees to choose to receive up to 50% of their Profit Sharing (PS) bonus in company stock, which is a type of option. If employees hold the stock for one year, they receive an additional 15% of the purchase amount in cash.
PS is an incentive paid once a year based on annual performance, and can amount to up to 50% of an employee’s annual salary. SK Hynix is expected to pay out the PS bonus as early as the end of this month or the beginning of next month.
This year’s PS payout will be based on the new criteria established in the second half of last year through labor-management negotiations. Previously, the maximum PS payout was capped at "up to 1,000% of base salary," but the new standard abolishes this limit. Instead, 10% of the previous year’s operating profit will be allocated as the total PS pool, with 80% paid immediately and the remaining 20% deferred over two years.
With the company committing to pay out 10% of its operating profit as performance bonuses, the average payout per employee among the approximately 33,000 staff members is expected to be around 136 million won. Depending on years of service, position, and performance evaluations, some employees may receive more than 200 million won.
According to SK Hynix, employees participating in the Shareholder Participation Program can choose to receive their PS bonus in stock in increments of 10%, ranging from a minimum of 10% up to a maximum of 50%. For example, if an employee receives 100 million won as a PS bonus and opts for the maximum 50% in stock, they would be granted 50 million won worth of shares.
However, unlike last year when employees could choose between lump-sum and quarterly payouts, this year, the stock option can only be paid as a lump sum. This change appears to be influenced by the pending amendment to the Commercial Act currently under consideration in the National Assembly. In the latest notice, the company informed employees that the implementation of the Shareholder Participation Program could be altered or canceled depending on whether the amendment is enacted.
The "third amendment to the Commercial Act," which includes a mandatory requirement to retire treasury shares, is scheduled for legislative discussion at the first subcommittee on bill review on January 21. If the National Assembly moves quickly, the bill could be passed as early as this month or in March. Should the amendment pass, it may become difficult to maintain the program using treasury shares. While treasury shares have typically been used for various purposes, including employee compensation, the amendment would require immediate retirement of purchased shares, significantly limiting their use.
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