LIG Nex1 recorded its highest profit ever in the first quarter of this year due to a defense industry boom, but dissatisfaction among employees is rising. Despite achieving its highest results last year, LIG Nex1 only paid out performance bonuses at around 100% of the base salary (for research employees), which led to employee grievances.
This year, a new sales record is expected to be set based on several years of backlog, but as the company declared emergency management and requested participation in expense reduction, conflicts between labor and management are deepening.
The first union, which is primarily composed of office workers and belongs to the Korean Confederation of Trade Unions (KCTU) LIG Nex1 chapter, is set to negotiate a collective wage agreement on the 14th. This comes after the previous union chapter leader was dismissed through a member vote in early last month and a new executive body was established to begin negotiations with management.
LIG Nex1 surpassed 3 trillion won in annual revenue last year, marking its largest sales ever. Operating profit was also at a record high of 230 billion won. However, it is reported that the performance bonuses paid by the company were lower than the previous year.
LIG Nex1 allocates 10% of its operating profit for performance bonuses. This year, the allocation ratios were divided by job category. Research employees receive 105% of their base salary, while security personnel receive 154%. Excluding fixed overtime pay included in the salary, research employees reportedly receive about 90% of their salary. There are considerable complaints from research employees about receiving less in performance bonuses compared to non-research employees.
The levels are also lower compared to competitors. Other major defense corporations, such as Hanwha Aerospace, provide 710% of base salary and a one-time payment of 5 million won, while Hyundai Rotem provides 500% of base salary and a one-time payment of 18 million won as performance bonuses. Among employees, there has been a vocal dissatisfaction that despite the overall boom in the defense industry, LIG Nex1's bonuses are significantly lower.
There are widespread reactions suggesting that the company’s announcement last month regarding the distribution of treasury shares was a way to pacify the backlash over performance bonuses. On the 23rd of last month, LIG Nex1 stated that it would distribute 10 shares of treasury stock to all employees, excluding executives, as a form of encouragement and motivation. At the time of the board's decision, the estimated value of the 10 shares of treasury stock was around 3.1 million won. The union is opposing the unilateral notification by management concerning the distribution of treasury shares without prior negotiation during the bonus discussions.
CEO Shin Ik-hyun's declaration of emergency management has escalated the backlash. There are criticisms that the company is not adequately compensating for its performance and only demanding shared sacrifice. It is reported that at an internal face-to-face communication event last month, CEO Shin reiterated the emergency management mentioned at the beginning of the year, citing uncertainties both internally and externally.
There have been reactions that CEO Shin's suggestion for employees to express their opinions regarding performance bonus dissatisfaction with their real names rather than anonymously shows a lack of willingness to communicate. Among some employees, there are also criticisms of his authoritarian attitude linked to his military background.
LIG Group was designated as a public disclosure target corporate group for the first time on the 1st of this month. This designation is attributed to the significant increase in the assets of its key defense subsidiary, LIG Nex1, amid countries' military buildup movements. LIG Nex1 accounts for 83% of LIG Group's total assets (7.109 trillion won). Gu Bon-sang, chairman of LIG, has been designated as the sole controlling owner.