The PACIFIC : Learning the Negotiating Game : Labor, Management Resort to Rough Tactics in S. Korea After Democratic Reforms
Managers at Hyundai Engineering & Construction, the parent of one of the country’s leading industrial groups, were so disturbed by one employee’s attempt to form a white-collar union that they had the man kidnaped.
Striking workers in another company in the conglomerate, Hyundai Precision Industry, got mad enough over a wage dispute that they detained their chairman for five days, forcing him to the negotiating table.
Welcome to labor relations--Korean style.
Dramatic changes have taken place in the corporate scene over the past year since the government initiated democratic reforms that allowed organized labor to emerge from the shadows of South Korea’s economic boom. The violence that erupted in wildcat strikes last summer has given way to more orderly confrontation in this year’s season of wage negotiations, which is now drawing to a close.
But labor and management admit that they have much to learn about negotiating and communicating with each other, as evidenced by the Hyundai incidents.
Reaction to Suppression
“It’s an embarrassing situation for us,” said a spokesman for the Hyundai group. “Managers and workers are all Hyundai family, and it’s a tragedy that this happened, but both sides were lacking in experience. We expect things to go more smoothly next year.”
Labor unrest in the Hyundai Group was typical of the trouble that cropped up at more than 1,000 South Korean companies since the beginning of the year. Workers demanded substantial pay hikes--and in many cases negotiated increases greater than 20%--reasoning that they had long been passed over by the benefits of rapid economic growth.
Pay raises have averaged 12.7% so far this year, compared to 10.1% in 1987, according to the Federation of Korean Trade Unions. Annual wage increases averaged 7.8% between 1963 and 1986, lagging behind yearly rises in labor productivity that averaged 12.8%. During the same period, South Korea evolved from an agrarian economy into an export-oriented industrial powerhouse, protected from outlawed labor unrest by a succession of military-backed authoritarian regimes.
“Organized labor has gained considerable power over the past year,” said Park Won Kyu, the union federation’s chief of planning and research. “Last year’s outburst was the result of long suppression by the government. It was like a volcano. The labor movement now will be more orderly, and healthy.”
The current strikes, most of which are legal because labor regulations have been simplified and mandatory cooling-off periods shortened, have extracted a price.
A survey by the Ministry of Trade and Industry indicates that manufacturers suffered nearly $1 billion in production losses and $262 million in export losses during the first five months of the year owing to work stoppages. Hyundai Motor’s plant in Ulsan shut down for 24 days before workers accepted a 28.6% wage hike in May, and the company counts production losses in terms of the 70,000 automobile bodies that it did not stamp out, many of which would have been Excel subcompacts bound for North America.
A year ago, unions had been established in only four of the 25 companies affiliated with the Hyundai Group, which makes an array of products from oil rigs and ships to personal computers. Hyundai was embroiled in some of the worst labor violence last year. Now employees in 21 Hyundai companies have organized.
“It’s a social trend,” said the Hyundai spokesman. “The management is expecting that the existence of unions will benefit the companies in the long run.”
Leader Held Captive
But Hyundai, like most other South Korean corporations, fought tenaciously to prevent the unions from cropping up after Labor Ministry officials and police stopped intervening in labor disputes a year ago. Management drew battle lines when 10 employees of Hyundai Engineering & Construction announced in April that they were forming the first union for white-collar workers in a South Korean conglomerate.
Company officials persuaded all but one of the labor leaders to repudiate the union, but So Chong Ui, head of the organizing committee, said he resisted offers of cash and promises by the company to support him in a political career. Then on May 6, a company managing director took him drinking and lured him into a trap: So was shoved into a black sedan, blindfolded and taken to the provincial city of Mokpo, where he was held captive for five days until he signed a letter of resignation.
Police have arrested two company executives and seven others, including a Japanese-born Korean described as a gang leader, on kidnaping charges. Hyundai apologized to the public in newspaper advertisements, but questions remain about how high in the corporate hierarchy the planning of So’s abduction took place.
“A full investigation of the case can’t be expected in South Korea’s current social and political climate,” So said.
Meanwhile, about 1,600 of the company’s 3,800 white-collar workers have joined So’s union, which is seeking to remedy wage complaints following stagnation in the construction industry.
“Nobody was willing to take the initiative but they joined once they saw the union was available,” So said. “There were a lot of mice, but no one wanted to put the bell on the cat’s back.”
Wage negotiations are still dragging on at Hyundai Precision Industry, a defense contractor whose chairman, Chong Mong Gu, was forcibly detained for five days at the end of May at a company plant at Changwon by workers requesting a $180 monthly pay hike. (He was eventually released after complaining of high blood pressure and other ailments.)
Workers also beat up two white-collar employees at the plant, the company contends, and their demand for immunity from prosecution is partly responsible for the impasse in negotiations.
Don’t Like to Compromise
“Koreans don’t like confrontation, but they also don’t like to compromise,” said the Rev. Basil M. Price, chairman of the Institute for Labor and Management at Seoul’s Sogang University. “They don’t know when to give and when to stand firm.”
Inflexibility in workers’ demands is part of the problem, and so is a lack of preparation on the part of management to take responsibility for labor relations, Price said. “Management never had to be much involved in labor disputes before because it was all left to the police and the intelligence services,” he said.
Managers have tried to cope with a mushrooming of company-based unions--the number registered with the Labor Ministry jumped by 73.5% over the past year to 4,729--with tactics of persuasion and intimidation.
A popular strategy is to sponsor a pro-management “union” that foils attempts by dissident workers to register at the local labor office. That was what happened at Samsung Shipbuilding & Heavy Industries, where 26 people were reported injured when rival unions fought in April. Ultimately, neither union registered with authorities, but the workers secured a wage hike that made them the highest paid in the shipbuilding industry.
It is too early to determine what effect higher wages, coupled with the gradual appreciation of the South Korean currency, will have on the export-driven economy. Much fuss was made about damage caused by labor turmoil last year, yet exports grew by 32.6% from the previous year, when there were few disputes.
“Pushing wages too high may make South Korean industry lose some of its competitive edge, but at the same time it will help us improve productivity through technical innovation,” said Park, of the union federation. “Workers have sacrificed enough, and we’ve reached a place where we cannot turn back.”
