Shares of Samsung Electronics surged on Thursday after it reached an 11th-hour agreement with its South Korean Union to prevent a strike, although the terms which encompassed bonuses of around $416,000 for some workers gave rise to some worries.
An 18-day strike was planned by some 48,000 members of the Union, however, has now been suspended, while, the agreement which was negotiated by the government, is placed to a vote between May 22 and May 27.
The leader of the Union said, he expects it to be rectified.
Across South Korea, the deal ignited relief. Samsung, a South Korean multinational manufacturing conglomerate, accounts for about a quarter of the export of the country, and, the planned strike was expected to invoke huge damage to the economy, as well as, cause a furrow in global chip supply if allowed to go through.
Samsung shares rose more than 5% higher in morning trade.
Senior Analyst at NH Investment & Securities, Ryu Young-ho, said, while investors expressed relief after the strike was successfully averted, the agreement was not positive in its entirety as it had led to substantially higher Labour cost.
He continued, the intention to pay performance bonuses in stock rather than cash could lessen the immediate financial burden on the Electronics manufacturer.
A demand by the Union that 15% of operating profit be allocated towards bonuses was also scaled down.
According to the agreement, Samsung is expected to set aside about 10.5% of operating profits for special bonuses for the chip division. The chip division shelters its memory and logic chip businesses, the Union made known.
As revealed by a document, these bonuses would be paid in company stock for at least ten (10) years and conditional upon the chip division making more than 200 trillion won ($135 billion) in yearly operating profit from 2026 to 2028 and 100 trillion won from 2029 to 2035.
