Private think tank opposes profit-sharing proposal

SEOUL (Yonhap) - An economic think tank on Wednesday expressed direct opposition to a government proposal for large businesses to share some of their profits with smaller suppliers, saying the scheme is based on ambiguous and erroneous ideas.
In a report titled "Errors and Problems of Profit-sharing," the Korea Economic Research Institute (KERI) said a new government-developed index to gauge large businesses' contributions to joint growth of their suppliers was also erroneous as it "was created under an extremely one-sided policy goal to assist small- and medium-size enterprises (SMEs)."
KERI is an research arm of the Federation of Korean Industries (FKI), the largest business lobby in South Korea with more than 600 of the country's largest conglomerates as its members.
Opposition from the FKI could well be the very end of the profit-sharing scheme as it, according to the government committee pushing the idea, largely depends on voluntary support and participation of large conglomerates to share their own profits.
The idea was proposed earlier in the year by Chung Un-chan, a former prime minister who now heads the Commission for the Shared Growth for Large and Small Companies.
Chung said the proposed program will be strictly voluntary and that companies will only have to share what they can from their "excess" profits.
Many, however, have expressed opposition to the move with Samsung Electronics Co. chairman Lee Kun-hee earlier saying he has never even read about such an idea in any book.
KERI confirmed Lee's claim, saying the term "excessive profit" appears to mean what exceeds normal profit, but that it is not and cannot be used as an economic term as what is "excessive" cannot be determined objectively.
The report also said the government index to measure companies' voluntary support for smaller firms will, in reality, force the companies to make forced or involuntary contributions to be on good terms with the government or the government commission.
bdk@yna.co.kr
(END) SEOUL, June 8 (Yonhap) -- An economic think tank on Wednesday expressed direct opposition to a government proposal for large businesses to share some of their profits with smaller suppliers, saying the scheme is based on ambiguous and erroneous ideas.
In a report titled "Errors and Problems of Profit-sharing," the Korea Economic Research Institute (KERI) said a new government-developed index to gauge large businesses' contributions to joint growth of their suppliers was also erroneous as it "was created under an extremely one-sided policy goal to assist small- and medium-size enterprises (SMEs)."
KERI is an research arm of the Federation of Korean Industries (FKI), the largest business lobby in South Korea with more than 600 of the country's largest conglomerates as its members.
Opposition from the FKI could well be the very end of the profit-sharing scheme as it, according to the government committee pushing the idea, largely depends on voluntary support and participation of large conglomerates to share their own profits.
The idea was proposed earlier in the year by Chung Un-chan, a former prime minister who now heads the Commission for the Shared Growth for Large and Small Companies.
Chung said the proposed program will be strictly voluntary and that companies will only have to share what they can from their "excess" profits.
Many, however, have expressed opposition to the move with Samsung Electronics Co. chairman Lee Kun-hee earlier saying he has never even read about such an idea in any book.
KERI confirmed Lee's claim, saying the term "excessive profit" appears to mean what exceeds normal profit, but that it is not and cannot be used as an economic term as what is "excessive" cannot be determined objectively.
The report also said the government index to measure companies' voluntary support for smaller firms will, in reality, force the companies to make forced or involuntary contributions to be on good terms with the government or the government commission.
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