Large Companies Also Show a K-shaped Recovery: Samsung Accounted for 40% of Operating Profits

[경향신문]

The Seocho office of Samsung Electronics in Seocho-gu, Seoul. Yonhap News

After the COVID-19 pandemic, a K-shaped recovery was apparent among major South Korean corporations. The nation’s reliance on a handful of businesses, such as semiconductors, increased, and 40% of the operating profits from the top fifty corporate groups were from Samsung. Samsung also accounted for over 70% of the increased compensation for executives (the top five among those earning 500 million won or more from each company).

Experts expressed concern that the higher dependence on a particular business has made the South Korean economy more volatile to the relevant business climate.

On April 12, the Kyunghyang Shinmun reviewed the business reports of 224 subsidiaries of the nation’s top fifty groups (with the exception of two unlisted groups) listed on the stock exchange based on the value of their assets last year. The results showed that the operating profits of Samsung group (43.9 trillion won) accounted for 42.0% of the total operating profits of the top fifty groups (102.4 trillion won). Samsung’s proportion increased by 8.0% compared with 2019 (34.0%), before the COVID-19 outbreak.

Samsung’s position was stronger even among the top four groups. Samsung accounted for 65.0% of the operating profits earned by the top four groups (66.1 trillion won), 8.0% higher than the previous year (57.0%). The results seem to reflect the fact that semiconductors flourished amid the COVID-19 pandemic, while businesses that other groups focused on suffered a blow. Hyundai Motor Group saw operating profits decrease 20.8% due to poor car sales hit by COVID-19, and SK Group’s profits dropped 48.2% due to the bad performance of the oil refinery industry.

Such performances were reflected in the executive salaries. Samsung paid the top five executives who earned an official salary (including wages, bonuses, and other income) of 500 million won or more approximately 37.6 billion won more than a year ago. Given that the compensation for the top five highest-paid executives in the top fifty groups increased by 51.2 billion won from last year, Samsung accounted for 73.4% of the total increase. Samsung also accounted for 19.7% of the annual salaries of the top fifty groups, an increase from the previous 15.3%.

Meanwhile, at large companies like Doosan group (-74.5%) and Hanjin group (-66.1%), whose major businesses performed poorly, the compensation for high-wage earners fell drastically. Among the top fifty groups, twenty groups cut compensation from the previous year. Many of these companies, unlike Samsung, reflected the performance in 2019, before COVID-19, when determining the salaries, and when last year’s poor performance is reflected in next year’s salary, the gap is expected to widen further.

Experts point out that the increasing dependency on a particular company or industry could raise the volatility of our economy. Lee Hang-koo, a researcher at the Korea Automotive Technology Institute said, “If the gap between industries widens, partner firms could face threats to their survival.”