KOREA: Stock options question corporate conscience - 1 Apr 2009

Stock options question corporate conscience

 Some major listed firms here have expanded stock option plans for their
employees this year, despite reports of canceled stock options in the
United States and other advanced countries.

Data at the Financial Supervisory Service and the Korea
Exchange showed that about 20 listed firms are granting their
executives and employees stock options totaling 5.74 million in common
stocks from January to March 27.

The figure represents a 24.72 percent increase in total stock
options so far this year, compared to the total of 4.6 million offered
by 19 firms during the same period in 2008.

Observers said the companies initially planned to grant 614,000 in stock options to 107 executive-level employees.

But moral issues rising from the appropriateness of such action
during the current tough economic times prompted the companies to
reverse the plan earlier this year.

News reports had praised corporate chiefs and their executives
of such major conglomerates as Samsung and LG for relinquishing part of
their hefty salaries and even bonuses to limit the act of cutting
wages, while aiming to hire more new workers. Some say that the
companies gave up salaries and bonuses under indirect government
pressure.

According to the latest data from the major companies, the Korea
Exchange Bank accounted for 490,000 shares; Woongjin Coway 330,000;
Doosan 9,800; Doosan Construction 79,650; Doosan Infracore 234,000;
EINS 3 million, and BIF Borneo Furniture 150,000.

Observers said most of the companies, excluding Woongjin Coway
and BIF Borneo, are either making no profit or making little profit.

Stock options mean that a company offers a select group of
employees the special right to buy shares at face value or below market
value and then dispose the shares after a certain period. They serve as
an incentive to boost profit.

Good corporate performance results in returns to employees. Some stock
market analysts have questioned the efficacy of offering such stock
incentives when corporate performance is generally under par.

Some other stock market analysts have noted the possibility of
a social backlash over the morality of corporations offering stock
options during a time when most of the population is suffering from a
credit squeeze and eroding disposable income.

This year, 58 Kosdaq-listed firms have decided to grant 17.93
million shares as a stock option, down 23.22 percent from a total 23.36
million shares offered by 64 firms.

By Yoo Soh-jung

(sohjung@heraldm.com)

2009.04.01