Scrap the idea of profit-sharing

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Scrap the idea of profit-sharing

The idea of profit-sharing between large and small companies floated by Chung Un-chan, head of a presidential commission committed to concoct measures to fix wealth imbalance in the corporate sector, has stirred up a hornet’s nest in the corporate and political community.

No one argues against the need for symbiotic relationships and balanced growth in the corporate environment but what the former prime minister and economist is proposing - shared capitalism so small contractors can claim some of the profits raised by large companies as stakeholders - is an entirely maverick concept.

The idea of profit sharing among nonaffiliated companies goes against the fundamental principle of the market economy as well as corporate rights protected by the Constitution. Lee Kun-hee, Samsung Group chairman, shook his head, saying he simply cannot understand what the former prime minister is trying to say and achieve.

Capitalism, of course, is imperfect. Its flaws require supplementary work through social consensus and reasonable fixes. But the notion of forcing companies to share their own profit with others is clearly antimarket. Unfair bargaining over prices between large companies and their parts suppliers are regulated through an antitrust agency.

If authorities really want to help small parts manufacturers, they should rework subcontract-related law. And if they want to do something about the disproportionate profit large companies are making, they should toughen the tax code instead of leving new corporate regulations. Even socialist economies do not enforce such policies among enterprises.

An unbaked and untested economic policy would only do harm. If profit-sharing becomes mandatory to companies that attain more profit than they expected at the beginning of the year, they are bound to exaggerate profit targets to duck the order.

Moreover, big companies can shun their local subcontractors and instead outsource to foreign suppliers to avoid local regulations. Under the circumstances, small and medium companies would eventually face much bigger trouble without government help.

We understand the good intentions behind the idea but they cannot be applied in the real world. Large companies should not be forced by the government to seek co-prosperity with their suppliers. If deemed unfeasible, the idea would best be thrown away. Our economy is currently difficult without ideological wrangling.
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