Big business agrees to vague ‘shared growth’ planA presidential commission backed away from its original hard line on large companies being forced to share profits with their suppliers and contractors and introduced a less controversial system yesterday.
The Commission on Shared Growth for Large and Small Companies came up with a new, softer name for its shared growth objective, “cooperation profit distribution.”
Representatives from both small-and medium-sized enterprises and large companies agreed to introduce the system.
However, big business representatives said they regretted that the decision was made without their consensus, and some said the new model is so vague and broad they don’t know how it will really work.
In addition, the commission also decided to create a committee that would mediate issues regarding large companies poaching employees from SMEs.
At the commission’s 13th meeting held at Palace Hotel in southern Seoul yesterday, the commission said it would give points to companies that adopt the system when it evaluates how they do on sharing growth.
The so-called cooperation profit distribution is a system for large companies to share profits with their suppliers and contractors based on a previous agreement.
It is less controversial than the commission’s original idea of so-called excess profit sharing because it will be based on a prior agreement between small and large companies. The previous plan didn’t and was supposed to be mandatory.
In the meeting, representatives from the business community were present. They boycotted two previous meetings because they opposed the idea of excess profit sharing.
“This is to encourage large companies and their contractors to decide how and with whom they are going to share profits,” said Choi U-yeok, head of the shared growth team at the Ministry of Knowledge Economy.
“After controversy over ‘excess profit sharing,’ the commission changed its name and decided to introduce cooperation profit distribution,” the Korea Federation of Small and Medium Business said in a statement.
“Although large and small companies and civilians advocating for the public interest may have different opinions,” said Minister of Strategy and Finance Bahk Jae-wan, “the fact that they came together and reached a compromise is better than the meeting breaking down.”
Chung Un-chan, 65, head of the commission, originally came up with a more radical idea. His idea was for SMEs to share the amount of profit that exceeds annual targets set by large companies.
The business community and even government officials opposed the idea and said it was unrealistic and against market principles.
In response to the idea, Samsung Electronics Chairman Lee Kun-hee even said he “never heard of such a thing while he was studying economics.”
Former Minister of Knowledge Economy Choi Joong-kyung also rejected the idea as unrealistic.
There were some complaints from the business side on the new model.
“We regretted that the commission passed cooperation profit distribution without fully listening to opinions from the business community,” the Federation of Korean Industries, a leading business advocacy group, said in a statement.
A representative from the business community said the plan is so ambiguous and inclusive that the commission members were able to get people to agree to it.
“It is difficult to say what we agreed on, and there was nothing really we would object to,” a business representative said. “But it is meaningful that the plan is based on voluntary agreements.”
By Limb Jae-un [firstname.lastname@example.org]
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