As chip stocks tumbled, leaving retail investors nursing losses, some Samsung Electronics (005930.KS) employees welcomed the decline, drawing criticism. Because their bonuses are paid in company shares rather than cash, a lower stock price means more shares.
Samsung Electronics closed at 215,500 won on the 16th, up 2.62% from the previous session, while SK hynix (000660.KS) ended at 1.27 million won, up 0.79%, according to the Korea Exchange on the 18th. The gains fell far short of recovering the previous day's drops of 9.48% and 10.85%, respectively.
Contrary to investors' concerns, posts calling for Samsung Electronics' stock to fall to 100,000 won appeared on Blind, an anonymous workplace community app. It could not be confirmed whether the author actually works in the semiconductor division.
Behind the reaction is a special performance bonus program. In May wage negotiations, Samsung Electronics management and the union created a special performance bonus funded by 10.5% of the Device Solutions division's operating profit, separate from the existing Overall Performance Incentive (OPI). The amount remaining after taxes and insurance premiums are deducted from each employee's payout is delivered entirely in company shares.
For the same payout, the number of shares received depends on the reference price used in the calculation. An after-tax bonus of 100 million won buys 400 shares at a price of 250,000 won, but 500 shares at 200,000 won. If the price later recovers to 250,000 won, those 500 shares would be worth 125 million won — 25 million won more than if the employee had received 400 shares from the start.
The upshot is that employees hope for a lower price before the share count is fixed and a higher one afterward. Underpinning that calculation is a belief that the stock will rebound over the long term as demand for artificial intelligence chips grows and the memory market improves.
Whether the current decline will actually affect the number of shares paid out remains unclear. Samsung Electronics announced detailed payment terms on the 7th. Payout rates by business division will be disclosed next February, and the shares will be distributed in late March or early April after approval at the annual shareholders meeting next March. The key question is when the reference price for the share calculation will be set.
A falling price is not an unqualified benefit either. Only one-third of the shares can be sold immediately, with the remaining two-thirds locked up in equal portions for one and two years. If 500 shares received at 200,000 won fall to 150,000 won, their value drops to 75 million won. Shares under a sale restriction carry that much more exposure to price swings over time.
SK hynix set the cash and share portions of its profit sharing (PS) at 50% each in this year's wage and collective bargaining agreement. Employees who prefer shares can raise the equity portion in 10 percentage point increments, up to 100%. Unlike Samsung Electronics, which pays entirely in shares, SK hynix gives employees a choice.
Both companies' share-based compensation programs are intended to align the interests of employees and shareholders over the long term by having staff hold their bonuses as equity. Yet until the share count is fixed, the interests of shareholders hoping for a higher price can diverge from those of employees seeking more shares at a lower one.