Talks to Break Deadlock Over Samsung Electronics Union Strike End in Failure

Deadlock Deepens as Mediation Fails Amidst Looming Supply Chain Disruptions and Demands for Pay Equity

As of May 13, Samsung Electronics and its union were unable to reach a pay deal, putting the company’s supply chain at risk of a massive disruption apart from potentially affecting the company’s standing and the health of the South Korean economy. Significantly, the inability to reach a mediated solution follows the Government leading talks with union representatives over the last two days. Recognizing the distress caused among stakeholders by the potential Samsung Electronics union strike, an emergency meeting for related ministers was convened by South Korea where Prime Minister Kim Min-seok instructed the government to closely monitor the situation considering its impact on the national economy. The Prime Minister urged “proactive support to ensure dialogue between the union and management can continue so this doesn’t lead to a strike under any circumstances.”

Huge Discrepancy in Bonus Pay

After news of the emergency ministerial meeting, Samsung’s shares stabilized to 0.7 per cent, an increase from the 6 per cent drop until then. The union expressed its displeasure at the massive pay disparity with rival firm SK Hynix and threatened to go on strike for 18 days from May 21. The union has indicated that over 50,000 workers could abstain from duty, causing delayed shipments to customers and inflate chip prices which would ultimately benefit rivals. Union representative Choi Seung-ho noted that none its demands were addressed by Samsung, including the removal of a cap on bonus pay currently set at 50 percent of annual base salary. Even though the union does not plan to resume talks with the management before the strike date, it is open to consider “a proper proposal” if the company presents one.

Corporate Response and Mediation Breakdown

On its part, Samsung expressed regret at the collapse of talks while reiterating its commitment to continue efforts to engage in “sincere dialogue” with the union to prevent a worst-case scenario. The National Labor Relations Commission, a governmental body that mediated the talks, noted that it attempted to present various alternatives but decided the wrap up the process “due to the irreconcilable gap between the two sides positions while acting on the union’s request to suspend the talks.”

Demands for Pay Parity and Profit Sharing

According to CIO Bulletin, Samsung is under pressure to match its competitor SK Hynix’s pay hike offered to employees last September which also included scrapping the cap on bonus pay. The legitimate demands of over 90,000 union members representing over 70 per cent of Samsung’s South Korean workforce comprising:

• 7 per cent hike in base salaries

• allocation of 15 per cent of annual operating profit as bonus pay, and

• More clarity on how bonus pay is calculated

are best addressed promptly for the benefit of all concerned stakeholders.