Samsung freezes pay for 2,000 execs

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Samsung freezes pay for 2,000 execs

Samsung Group said Friday it will freeze wages for about 2,000 executives next year as Korea’s largest conglomerate tightens its belt.

While there will be no salary increases in 2015, incentives and bonuses linked to each business division’s performance will be provided as usual, the group said.

“An email was sent from the human resources team on Thursday that suggests executives should set an example of helping the company by freezing their wages,” said a Samsung Group official.

It will be the first time since 2009 that Samsung has not raised executives’ wages.

The move comes after the group’s flagship Samsung Electronics suffered a huge drop in earnings due to slumping smartphone sales. Last year, the Korean tech giant accounted for more than 90 percent of the operating profit of listed Samsung affiliates.

According to data from the Korea Listed Companies Association and Korea Exchange, Samsung Electronics earned 19.7 trillion won ($17.9 billion) in operating profit through September, a drop of 30.6 percent from a year ago.

In the third quarter alone, the company suffered a 60 percent year-on-year drop in operating profit as its smartphone business was squeezed by Chinese companies on the low end and Apple on the high end.

In order to reduce costs, Samsung Electronics in July ordered executives to travel in economy class for flights under 10 hours and reduced allowances for business trips. It also encouraged employees to take vacations instead of receiving pay for unused time off.

As for the group, it has taken other cost-saving measures, such as reducing the number of executive promotions, restructuring business divisions and redistributing employees.

The recent announcement of the sale of four defense and chemical affiliates to Hanwha Group is also seen as a move to slim down and enhance profitability.

Industry insiders are speculating whether the moves by the nation’s largest chaebol will affect other conglomerates. However, some conglomerates with declining profits previously announced they would freeze or reduce executive wages.

Against the backdrop of falling crude oil prices, SK Innovation, the holding company of the nation’s largest refiner, SK Energy, announced a freeze on wages last week after negotiating with its labor union. It was the first time since 2009 the company decided not to raise wages. Its executives have been returning 10 to 20 percent of their pay since July.

Other conglomerates have been reducing costs by appointing new chairmen.

Korea’s largest steelmaker, Posco, said in March that the new chairman, Kwon Oh-joon, and about 80 executives would return as much as 30 percent of their base pay to the company.

KT, the nation’s second-largest mobile carrier, also has been doing the same thing since January, after Chairman Hwang Chang-gyu took control.

Executives of Hyundai Heavy Industries, Korea’s largest shipbuilder with more than 3 trillion won of operating losses through the third quarter, also have been returning a portion of their wages.

CEO Kwon Oh-gap, who took charge in September, announced last month that he would not receive a single penny until the company’s business rebounds.

Industry observers said the recent pay cuts by conglomerates are reminiscent of the 2008 financial crisis, when Samsung, LG, SK and Hanwha cut or froze executive wages.

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