Korean firms cut costs, work overtime amid global economic uncertainties

Posted on : 2024-05-02 17:45 KST Modified on : 2024-05-02 17:45 KST
Jitters about circumstances both abroad and at home have some of Korea’s biggest corporations tightening their belts
(Getty Images)
(Getty Images)

An increasing number of Korean companies have been taking proactive measures to increase working hours, cut costs and restructure. There’s a growing sense of alarm in the corporate sector over rising economic uncertainty that’s being driven by high interest rates, exchange rates and inflation.

Executives at major subsidiaries in the Samsung Group recently began working six days a week in what amounts to the company going into emergency mode.

That’s a step that wasn’t even taken when Samsung Electronics, the leading subsidiary in the group, posted abysmal figures of 15 trillion won in losses in its semiconductor division last year.

Buoyed by a rally in the sector, Samsung Electronics’ semiconductor division managed to return to the black in the first quarter of this year, posting operating profits of 1.91 trillion won (US$1.38 billion). For the company to then have executives take on a six-day workweek suggests just how bad the economic uncertainty has become.

“There’s pervasive anxiety inside the company about uncertain economic conditions both at home and abroad,” a source at Samsung said.

Samsung isn’t the only company in that position. The SK Group, Korea’s second-largest conglomerate, has reinstated Saturday meetings for members of upper management, 24 years after the practice was stopped. Executives on the SUPEX Council, the highest advisory board at the company, have also surrendered a flexible work schedule that allowed them to take off two Fridays each month.

Corporate restructuring is also underway in some sectors. In the distribution industry, for instance, alarm bells are ringing because of encroachment by a range of e-commerce upstarts from Korea and other countries, including Coupang and AliExpress.

Emart is encouraging early retirements, the first time it has done so since its establishment. The company is also taking steps to merge its hypermarkets and neighborhood supermarkets in the second half of the year.

Lotte Department Store and Hyundai Department Store are working to increase business efficiencies by closing underperforming outlets. And LG Chem, the biggest firm in Korea’s petrochemical industry, is currently restructuring its workforce by accepting applications for early retirement packages.

Companies are also slashing executives’ compensation and benefits as a cost-cutting measure.

Major groups including Samsung, SK and LG have reduced the total amount of compensation allowed for directors by 1 billion-5 billion won and cut the number of new executives relative to last year.

The Lotte Group has banned golf outings on weekdays and activities on weekends, including trips abroad. Emart has reportedly asked executives to minimize use of their corporate cards.

Korean companies’ belt-tightening measures are motivated by disquieting economic conditions not only at home but also in other countries.

“Even though leading companies’ performance improved in the first quarter, increasing economic uncertainty makes it necessary to take preemptive measures. These groups are likely to remain in emergency mode in the second half of the year,” said an executive at one of Korea’s five biggest conglomerates.

By Kim Kyung-wook, staff reporter

Please direct questions or comments to [english@hani.co.kr]

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