Korea's Industry Minister Wants Profit-Linked Bonuses Put to a Shareholder Vote

South Korea’s Minister of Trade, Industry and Resources, Kim Jeong-kwan, has come out against the practice of paying employee bonuses calculated as a fixed percentage of operating profit, and says the government will push to require approval at general shareholder meetings before such payouts can be made. The move would shift a decision that Korean companies have long treated as an internal compensation matter into the formal domain of shareholder governance.

A Formula Under Fire

The target of the minister’s criticism is a bonus structure widely used at large Korean companies: performance pay funded by carving out a set share of annual operating profit and distributing it to employees. Kim’s objection, made publicly, is paired with a concrete remedy — legislation or rule changes that would make a shareholder-meeting resolution a precondition for this type of payout, rather than leaving it to boards and management alone.

The announcement stops short of banning profit-linked bonuses outright. Instead, it reroutes the authorization path. If the requirement is enacted, a company wishing to distribute a slice of its operating profit as performance pay would first need to win a vote from the owners of that profit — its shareholders.

Why the Ministry’s Voice Carries Weight Here

Compensation rules might seem distant from an industry ministry’s usual portfolio, but the ministry Kim leads has historically sat at the center of Korean corporate policy. Its lineage runs back to July 1948, when it was established as the Ministry of Commerce in the First Republic. A cabinet reorganization under President Park Geun-hye in March 2013 rebuilt the ministry and returned trade-negotiation authority to it from the foreign ministry, and in 2017, under President Moon Jae-in, its small-business functions were spun off into the new Ministry of SMEs and Startups. What remains is a ministry squarely focused on large industrial companies — precisely the firms where profit-sharing bonus formulas are most entrenched.

What a Mandatory Vote Would Change

Requiring shareholder approval would have two immediate effects. First, it introduces disclosure by default: putting a bonus pool on a general-meeting agenda means quantifying it, explaining its formula, and defending it in front of institutional and minority investors. Second, it hands shareholders a lever over a cost line that directly reduces the profit available for dividends and reinvestment — a tension that has fueled recurring disputes at Korean companies between employees expecting formula-based payouts and investors questioning their size.

How far the proposal goes will depend on details not yet spelled out, including whether the requirement would apply to all listed companies or only above certain thresholds, and whether existing bonus agreements would be grandfathered. Those specifics, along with the legislative vehicle the ministry chooses, will determine whether this becomes a structural change to Korean pay governance or a narrower check on the largest payouts.