[기고] Korea urgently needs to establish new compensation system due to talent drain

Since the Enron crisis in 2001, restricted transferable stock (RSU), which grants stocks based on employees’ years of service and corporate performance, has become the main compensation system for executives and employees in U.S. companies, instead of highly speculative stock options. Since Microsoft (MS) came into the spotlight in 2003 by replacing stock options with RSUs, 78% of S&P 1500 companies are paying RSUs from 2003 to 2023, and that figure rose to 93% in 2023. Apple CEO Tim Cook received 81.6% of his 2023 compensation in stock, of which 75% were RSUs. Stock compensation is said to increase by 25% this year. NVIDIA CEO Jensen Huang received RSUs worth over 30 billion won in 2022 despite being the largest shareholder with a 3.55% stake. On the other hand, stock options, which were once in the spotlight, were granted by 91% of S&P 1500 companies in 2001, peaked, and then continued to decline, reaching 27% in 2023.

In the case of the United States, the leading country in the stock-based executive compensation system, the Dodd-Frank Act, enacted in 2010 after the 2008 financial crisis, is the foundation. Instead of direct regulation, the authority of general shareholders’ meetings is strengthened to check excessive compensation for corporate executives and employees. there is. An independent compensation committee composed of outside directors who are board members is required to determine executive compensation, and the compensation details of the five executives who receive the most compensation are to be reported to the general shareholders’ meeting. Shareholders can exercise the right to veto executive compensation plans (Say-on-Pay).

Korea’s stock compensation system is poor. In the case of stock options, up to 20% of the total number of issued shares of a listed company can be issued, and the Commercial Act prohibits granting stock options to specially related persons (major shareholders and their relatives, corporate executives, corporations or individuals in an investment relationship, etc.) It is stipulated in This is the strongest level of regulation not even in Japan. If this trend continues, there are concerns that Korea will once again create stricter RSU-related regulations like stock options.

There are also concerns about stock compensation for major shareholders who hold excessive shares. In 2018, a $56 billion (approximately KRW 74.6 trillion) compensation package was approved for Elon Musk, who owned 21.9% of Tesla’s shares at the time, but minority shareholders questioned the independence of the board of directors who approved it, saying this amount was too excessive. In response to a lawsuit filed in October 2022, the District Court of Delaware, where the corporation is located, ruled in January this year that Musk’s stock options were invalidated. In this case, internal efforts are being made, such as Musk moving the corporate location to Texas and continuing to persuade shareholders, but the government does not judge it as regulation.

At a time when a quarter of the 21st century has passed and concerns about our information technology (IT) competitiveness are becoming more serious, we need to reflect on whether we have ideas about executive and employee compensation systems that are out of touch with the reality of the international market. . We hope that we will establish a system to effectively retain and develop talented people by considering the positive aspects as well, rather than just being aware of the risks of stock compensation.

[양희동 이화여대 경영대학 교수 한국경영학회 차기회장]

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