[Heavy Industry ON] Same Crisis, Different Choices... What Energy Companies' Bonus Policies Reveal

Strategy Over Results: How Compensation Policies Reflect Companies' Crisis Judgments
Beyond Short-Term Results to Organizational Stability
Corporate Philosophy Shapes Performance Bonuses

Even as the energy and chemical industries have taken a direct hit from the global economic downturn and weakening demand, the patterns of performance-based bonus payments among companies have diverged sharply. Moving beyond the traditional formula of “pay when there is profit, withhold when there is loss,” companies are now tailoring their compensation policies according to management’s perspective on the crisis and talent retention strategies.

Hanwha Solutions Yeosu Plant. Provided by Hanwha Solutions

In the petrochemical and battery sectors, there have been multiple cases of unpaid bonuses. Lotte Chemical and LG Chem did not pay performance-based bonuses due to operating losses. In the battery industry as well, both Samsung SDI and SK On recorded annual losses and withheld bonuses. These outcomes resulted from a slowdown in electric vehicle demand and oversupply from China, which put pressure on earnings.

On the other hand, the petrochemical division of Hanwha Solutions paid consolation money instead of performance-based bonuses, even though it reported an operating loss of 249.1 billion won. While business results were weak, this decision is interpreted as an effort to boost morale and maintain internal stability. A Hanwha Solutions representative explained, “Given that the industry is experiencing a prolonged slump, the company made this decision to uplift morale.”

The oil refining sector displays a different trend. GS Caltex posted an operating profit last year and decided to pay 25% of base salary as a bonus. HD Hyundai Oilbank also reported an operating profit of 474 billion won and a net profit of 53.1 billion won, deciding to pay 472% of base salary as a performance-based bonus. S-Oil recorded an operating profit of 288.2 billion won and is considering paying a consolation bonus in March. Although profitability declined compared to the previous year due to weaker refining margins, these companies have maintained positive earnings strength.

SK Innovation's case is more complex. The company posted an operating profit, but due to the burden from its battery subsidiary and increased financial costs, it recorded a net loss of 5.4061 trillion won. Nevertheless, performance-based bonuses were paid, albeit at a reduced scale compared to the previous year. This reflects the fact that the company’s core business strength and financial burdens are moving in different directions, which has influenced its compensation policy.

Ultimately, these cases demonstrate that performance-based bonuses are not simply a matter of profit or loss. Sectors in structural decline have suspended payments to focus on cost defense, while companies with stable cash flow have maintained a certain level of compensation even amid a cyclical slowdown. Within the energy industry, decisions differed according to market conditions, financial capability, and talent retention strategies.

Industry experts note that compensation policies serve as indicators of a company’s crisis awareness and strategic direction, beyond just short-term results. Companies that see the downturn as a long-term slump have prioritized securing cash liquidity, while those viewing it as a temporary adjustment have focused on organizational stability and retaining talent.

The contrasting landscape of performance-based bonuses in the energy sector not only highlights differences in industry resilience but also clearly reveals how companies assess and respond to crises.

Ryu Sungmin, Professor at Kyonggi University’s Department of Business Administration, commented, “In principle, performance-based bonuses are meant to be paid when profits are generated, but in sectors such as petrochemicals, where external circumstances prevent good performance, employees may feel a sense of injustice.” He added, “Hanwha Solutions’ payment of consolation money is not just compensation, but a decision based on corporate philosophy and organizational culture. Even in difficult times, recognizing employees’ efforts can serve as a long-term motivational and loyalty strategy.” He further explained, “Since bonuses can fluctuate excessively depending on the external environment, some adjustment is necessary, and taking care of employees like ‘family’ during a crisis can strengthen their sense of belonging and pride in the company.”

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