CEOs accept minimum wage to appease outraged shareholders

Industry

Published: 05 Apr. 2022, 16:42 Updated: 05 Apr. 2022, 19:08

CEOs accept minimum wage to appease outraged shareholders

Celltrion CEO Kee Woo-sung speaks at the annual shareholders meeting held on March 25, at Yeonsu District, Incheon, where the pharmaceutical company is headquartered. [CELLTRION]

Some shareholder wants chief executives to take big pay cuts, even suggesting they work for minimum wage.

During NCSoft's March 30 annual shareholders meeting, a stockholder asked CEO Kim Taek-jin whether he has "ever considered for even a moment receiving minimum or no wage."

"I did consider, not just for a moment, but for quite some time," Kim answered.

Kim added that he would accept the minimum wage only "when society shifts toward incorporating a more diversified compensation system, like in the United States."

Kim earned 10.6 billion won ($8.7 million) in salary and bonus last year, down 40 percent from the previous year's 18.4 billion won. Shareholders were asking whether he would accept a bigger pay cut to take a responsibility for the drop in the company's stock price.

The game publisher's stock price, which hit a record high of 1,048,000 won on Feb. 8, 2021, is down 54 percent to 480,000 won.

A similar scene played out at Celltrion's shareholder meeting held on March 25.

"CEO Kee Woo-sung and board chairman Seo Jin-seok should only be paid minimum wage until the stock price reaches 350,000 won," demanded a representative for a shareholder group.

CEO Kee accepted the demand after the representative repeated the request once more during the meeting.

Celltrion's share price peaked at 403,500 won in December 2020, and steadily declined through 2021 to 171,500 won on Tuesday, down 58 percent.

Kakao CEO Namkoong Whon [KAKAO]

A growing number of shareholders are demanding that CEOs receive only minimum or even no wage, urging them to take direct responsibility for declining stock prices or moral hazard problems.

Kakao's new CEO Namkoong Whon, who took office in March, got the ball rolling when he said he would "only receive minimum wage until Kakao's stock price reaches 150,000 won."

Kakao shares traded at 107,500 won Tuesday, up 31 percent from 82,200 won on Jan. 28, when the share prices of Kakao and related companies collapsed following the dumping of shares by Kakao Pay executives — but they are down from the all-time high of 173,000 won hit last June.

Namkoong was named the CEO after the former CEO designate Ryu Young-joon resigned due to a strong protest from the union and shareholders. Ryu sold 230,000 Kakao Pay shares in a block deal on Dec. 10, a little over a month after the company was listed.

If Namkoong is paid minimum wage this year, his annual salary is forecast to be around 23 million won.

Namkoong earned 5.6 billion won — severance pay included — from Kakao Games where he served as the CEO until December, and 6.1 billion won from Kakao, including company stock options.

Some corporate leaders have been taking similar approaches.

In February 2021, SK Chairman Chey Tae-won donated about 3 billion won of his annual salary to SK hynix employees who complained about smaller-than-expected bonuses.

"It is a good sign that some CEOs are promising to receive only minimum wage, as it shows that they are paying heed to shareholder voices," said Lee Seok-hoon, a researcher at Korea Capital Market Institute.

Some experts are concerned over the fact that the condition of compensation is depending on the stock price alone.

"Reward systems based solely on stock prices may undermine a company's business capability by putting emphasis only on short-term achievements and investments," said Cho Myeong-hyeon, a business professor at Korea University.

Cho explained that "a reward system linked to other indicators aside from stock prices is needed."

BY KIM GYEONG-JIN, SHIN HA-NEE [shin.hanee@joongang.co.kr]