To give workers a voice, Seoul city to introduce labor director system

Posted on : 2016-05-11 16:31 KST Modified on : 2019-10-19 20:29 KST
Seoul to introduce system credit with helping Germany mitigate effects of 2008 economic crisis
Seoul Mayor Park Won-soon explains the city’s labor policy
Seoul Mayor Park Won-soon explains the city’s labor policy

On May 10, Seoul Metropolitan Government published a detailed plan for the labor director system that it will be introducing. While this system may sound unfamiliar to South Koreans, it is currently in use in many European countries.

The European Union’s Charter of Fundamental Rights recognizes the right of workers to receive information about and to deliberate their companies’ social and economic decisions. Along with this, 18 of the 27 EU member countries allow labor union representatives or employee representatives to take part in the highest levels of decision-making as labor directors.

Germany is one of the best examples of a country that allows workers to participate in management. In Germany, companies have two boards of directors: the managing board of directors, which manages the company, and the supervisory board of directors, which elects and oversees the managing board of directors. Of these, the supervisory board of directors is composed of an equal number of stockholders’ directors, who are appointed in the general meeting of stockholders, and labor directors, who are recommended by labor unions.

In this system, labor directors are able to participate in all of the major decisions at a company, including the appointment and dismissal of top managers and planning investment. This system applies to public companies and private-sector companies with 500 or more employees. Interestingly, it is generally believed that the continuing participation of workers in management is what enabled Germany to maintain a steady level of employment while reducing working hours during the global financial crisis in 2008.

“Sharing specific information about company management has increased labor unions’ understanding of and trust in company managers. Directly participating in management has given workers a greater sense of responsibility for their company and improved the transparency of management,” said Kim Cheol, head of research at the Public Policy Institute for People.

One of the primary reasons that the city of Seoul is introducing a labor director system is to reduce social conflict.

“Labor directors will help ensure that managers reflect workers’ voices in management,” Mayor Park Won-soon said during a press conference on May 10.

According to a 2013 report by the Samsung Economic Research Institute (SERI), South Korea had the second highest level of conflict among the 27 members of the OECD (Organization for Economic Cooperation and Development). A survey by the Presidential Committee for National Cohesion found that disputes between labor and management were the second most serious kind of conflict.

“The labor director system will also help an accountable management system take hold at public companies,” said Park Tae-ju, chair of the Seoul Model Council. “Workers are stakeholders, too. If their representative sits on the board of director and if the decision-making process becomes more transparent, public companies can also be shielded from inappropriate meddling by the central government.”

“If even a single worker participates in management, it opens the way for correcting bad practices,” said Ha Seung-su, a lawyer who served as an outside director at Hyundai Securities for three years, starting in May 2004.

At the time, Hyundai Securities was paying Hyundai Group Chair Hyun Jeong-eun 30 million won (US$25,700) a month in consultant fees, but this stopped after Ha took issue with it.

While labor activists are in favor of introducing the labor director system in theory, they argue that appointing one or two workers to be non-permanent members of the board of directors will not accomplish much.

“As in Germany’s joint decision-making system for labor and management, labor representatives need to have the majority in order for labor to have a real say in decision-making,” said Nam Jeong-su, chief of education and publicity for the Korean Confederation of Trade Unions (KCTU).

“Because of an excessively strict interpretation of the law, Seoul’s labor director system requires labor representatives to leave the labor union. More work is needed if workers are to actually participate in management and express their opinions,” said Jeong Moon-ju, head of policy for the Federation of Korean Trade Unions (FKTU).

The Korea Employers Federation (KEF) called for the system to be scrapped at once, describing it as a “dangerous and rash experiment.”

“Boards of directors will be unable to make quick decisions because of conflicting views between the labor directors and the managers, and these losses will have to be borne by stockholders,” the KEF said in a statement on Tuesday.

By Jeong Eun-joo, staff reporter

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

 

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