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  • Seoul Metropolitan Government adopts ‘labor director system’ for 15 organizations for the first time in the country

  • SMG 1444


    – Conflict·Tension→ Coexistance·Cooperation. Changing the paradigm of business management…enhance civil services and strengthen the economy
    – Appoint 1~2 people per public organizations as non-permanent member of board of directors for 15 public companies and industrial complexes
    – Participation of employees of board of directors to have a voice in business planning, management results and share responsibilities
    – After an extensive gathering of public opinion to finalize an ordinance by August through public hearing etc. and enactment targeted by October


    □ Seoul adopts ‘Labor director system’ and appoint 1~2 people per public organizations as non-permanent member of board of directors for 15 public companies and industrial complexes for the first time in the country to change the paradigm of business from conflict and tension to coexistence and cooperation through communication.
    ○ Mayor Park Won Soon in November 2014 announced of ‘Seoul Investors and Funding Organizations reform’ and has introduced ‘labor director system’. Later in May ~ December 2015 he has gathered information from ‘Study of adoption of Seoul Investors and Funding Organizations reform participation of labor-management model’ (Seoul labor institute), and gathered the opinion of Seoul model, labor groups, scholars, management, union leaders.

    □ Seoul announced on the 10th (Tuesday) that employee and management should share the responsibilities and rights by communication, by adopting ‘Labor director system’. It will enhance the spirit of ownership among the employees leading to a transparent management, upgrade of civil services and eventually resulting into the source of economic growth, a virtuous circulatory economic structure.

    □ Employee participating on the board of directors will hold voting rights according to guidelines of the law and cooperation to the main agenda such as business planning, budget, incorporation reform, disposal of assets etc. and bring to the table an exclusive experience and knowledge of as an employee and reflect the voice of employees at the scenes of business

    □ Employee participating on the board of directors will also be liable to a responsibilities adherence to the guidelines of decree, ordinance and articles and policies of the association is obligatory. For an example, proven guilty of a bribery the participating employee will be punished with the same standards of a public company management and will be guided by the regulations of a public service officer.

    □ (Applicable organizations and number of people) Labor director system applicable organizations are of those with more than 30 employees of 15 public companies, industrial complexes, one third of permanent board members, 1~2 employees for each organization.
    ○ Seoul Metro, Seoul Metropolitan Rapid Transit Corp., Seoul Metropolitan Facilities Management Corporation, Seoul Medical Center, SH Corporation, Sejong Center for the Performing Arts, Agro-Fisheries & Food Corporation, Seoul City Credit, SBA, Seoul Design Foundation, Seoul Foundation for Arts and Culture, Seoul Philharmonic Orchestra, The Seoul Institute, Seoul Welfare Foundation, Seoul Foundation of Women & Family
    ※ Excluding investor organizations as Seoul tourism organization, scholarship foundations, community service centers, lifelong education centers

    □ (Appointment procedures) As per current legal proceedings, by public recruitment and recommendation by the board member recommendation advisory. Applicant requirements will be finalized through consideration and discussion to fit the customized needs of the organization in future.

    □ (Position) If a union member is appointed as a non-permanent member of the board he or she must withdraw from the union. This is in accordance to the ‘Labor union and labor relations adjustment Act’ stating those whom act on the benefit of or in the work scope of the management cannot be identified as a part of the labor union.

    □ (Term and compensation) Term is defined as 3 years as the local public enterprise regulation. There shall be no compensation except for fees such as participation of board meetings etc. that incur actual expenses or services. And also there will be commissioned education provided by professional organizations to fulfill the role as a board member.

    □ Seoul metropolitan government has outlined the back ground of the adoption of ‘employee participation as a member of the board’ as ① reduction of cost of social conflict ② OECD public organization management guideline act, for member countries which is already widely accepted
    ③ proven effective in European parliament, world economic forums etc. ④ Regulation and policies in country

    □ First, Seoul Metropolitan government has research results that Korea is 2nd in the 27 OECD countries of high social conflict (Samsung Economic Research Institute ’13 studies), especially the 2nd highest conflict factor being labor-management relations (Presidential Committee for National Cohesion), maximum cost of social conflict spent yearly is up to two hundred forty-six trillion won (KRW), in consideration of the above Labor director system is expect to alleviate the conflict
    ○ In 2013, strike at Korail for 23 days had caused a loss of four hundred and 44.7 billion won (KRW) (Ministry of Strategy and Finance 2013. 12)

    □ Second, Seoul’s adoption of ‘Labor director system’ may be the first in Korea but in 18 OECD countries such as Germany, Sweden, France etc. this is a widely accepted policy.
    ○ Germany: Adopted by steel manufacturing industries with over 1,000 employees in 1951, in 1952 with employees over 500~2000, in 1976, 2,000 employees in private enterprises
    ○ Sweden: In 1973, trial period of 3 years in companies with more than 100 employees then in 1976 expanded its deployment, today it is adopted by all companies with more than 25 employees.
    ○ France: In 1983 public organization adopted and led the way and expanded in private sectors in 2013
    ○ US, UK: Adopted voluntarily basis to overcome the management crises and enhance business performance with agreement of the union and management (British steel, American Chrysler etc.)
    – Who adopted it in public and private sector: Germany, Sweden, France, Austria, Denmark, Finland, Netherlands, Norway, Czech, Hungary, Luxembourg, Poland, Slovenia, Slovakia
    – Who adopted it in public sectors: Greece, Island, Spain, Portugal

    □ Third, employee participation as a member of the board is stated in Guidelines on Corporate Governance of State-Owned Enterprises (enacted in ’05, revised in ’15) and proven its effectiveness in European parliaments and World economic forums etc.
    ○ European parliament: June ‘12 “The financial crisis has proven the need of a management structure of the participation of interested parties” adopted the mandate with such a statement
    ○ German Chancellor Angela Merkel: At German codetermination 30th anniversary “ Codetermination is an achievement of Germany’s social capital market and also the strength of the German Market”
    ○ Siemens CEO Peter Löscher: Stated Oct ’09 “Codetermination is the strength of Germany”
    ○ World Economic Forum in 2011: John Studzinski (Vice-Chairman, Investor Relations and Business Development Group, The Blackstone Group International Partners LLP) has stated “ Employee participation in the board of directors is one of the factors that relieved Germany from its financial crisis”

    □ Forth, in Korea Social Enterprise Promotion Act (clause 8) is stating that the public enterprises to form a structure of participation of service beneficiaries and employees and according to study from the Korea institute of public finance, there is also policy proposal of multiple parties of interest to participate on the decision making of public enterprises.

    □ Seoul Metropolitan Government at the same time has assured that the concerns of some financial institutions will be addressed by enactment of this policy within the limits of the law, ensuring the constitutional rights of the management and also avoiding the postponement of decision making

    □ (concerns of ‘violation of law’) In the comprehensive boundaries of the law, It is a constitutional right of a metropolitan government and to have self-legislative power to enact an ordinance.

    □ (concerns of ‘violation management rights’) In the constitution of the free market economy order, there is no clause stating that employees cannot participate in the management decision, in fact ‘Labor director system’ is enforcing the responsibilities and ownership of employees and realizing governance in line with the fundamental constitutional value of economic democratization

    □ (concerns of ‘postponement of decision making impacting management negatively’) Employee member of board will be 1~2 people per organization taking up 10% give or take (For instance the number of board members for Seoul Metro is 13). It is to incorporate the experience and knowledge of the employee participating in the board

    □ Seoul Metropolitan Government plans pre-announcement of the legislation of Labor director system this May and submit it in August to congress after public hearing to finalize, enactment of the legislation is planned in October this year

    □ Seoul acknowledges that social consensus is required as it is being deployed for the first time in the country, through policy debates etc. and plans to refine the ordinance prior to submission while expanding the social consensus and agreement

    □ Mayor of Seoul, Part Won Soon states “We will all be owners and consumers of public enterprises unlike private enterprises. Through the enactment of Labor director system, we can achieve transparent public enterprises at more advance level of that of the private enterprise. Providing civil services more conveniently with governance, co-governing system. Any system without dedication and conviction of the participating parties will not succeed. To stabilize Labor director system we will need labor-management, experts from several fields and the interest and participation of the citizens”