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With no immediate end in sight for a prolonged strike, the labor and management of SC First Bank appear to be playing a game of chicken over its pay system, which could end up in a no-win situation for both sides, analysts said Tuesday.
Irked by a management plan to adopt a novel merit pay system, about 2,900 unionized workers at the seventh-largest lender in South Korea have been striking for the past month, the longest walkout in the history of the local banking sector.
They claim the new pay scheme is aimed merely at cutting labor costs and does not jibe with Korean culture. The South Korean unit of Standard Chartered Plc has 6,500 employees, half of which are unionized workers.
Defying criticism of turning a deaf ear to the Korean culture of respecting seniority, the management is determined to adopt a performance-based pay system, which it says will help provide better services to customers by bringing in competition in the fast changing local banking sector.
SC First Bank is the first lender operating in South Korea that seeks to overhaul the seniority-based salary scheme.
Market experts said the bank’s ongoing labor strike points to cultural conflicts stemming from a lack of understanding between a foreign owner and bank workers. They said the tension came as the management failed to find common ground and is trying to push for global standards for Korean bankers who are accustomed to the seniority-based pay system culture.
“From the perspective of foreigners, the adoption of the performance-based pay system is inevitable to boost competitiveness,” said Shim Kyu-sun, a bank analyst at Hanwha Securities Co. “But in the Korean banking industry which has the conservative culture, the bank’s push for the new scheme cannot but have helped to spark conflicts.”
The prolonged labor strike has forced the lender to temporarily shut down about 10 percent of its nearly 400 branches, causing bank customers to face inconveniences and sparking concerns about their deposit withdrawals.
Amid deepening tension between the two parties, four labor representatives flew to London on Saturday to visit the headquarters of Standard Chartered to stress the legitimacy of the walkout.
On Monday, Richard Hill, chief executive officer at SC First Bank, expressed his “deepest regrets” over the inconvenience and concerns caused by the labor strike and pledged to “do everything possible to seek an early resolution of the strike.”
Hill expressed hopes that the labor union will return to the negotiation table within this week and the bank has no plan to take harsh measures like the closure of other branches as it wants to resolve the dispute quickly through dialogues.
But the head of SC First Bank is adamant in stressing the need to introduce a performance-based salary system as the bank cannot continue to pay out high salaries without the bank’s growth.
A bank analyst, asking not be named, said it is not easy for a foreign lender to gain firmer footing in the Korean market as the global norms sought by global banks sometimes do not suit Korean culture or sentiment.
But Shim at Hanwha Securities also said that even if Korean banks try to push for a merit-based pay system like SC First Bank, their unionized workers might be angry, adding that some performance-based schemes tailored to the Korean culture are needed to raise banks’ overall competitiveness.
Market watchers also expressed concerns that the prolonged labor strike would dent the bank’s business and hurt its reputation, which has been already hit by the rumors of its withdrawal from the Korean market and the regulator’s recent punishment of the bank.
In July, the financial watchdog penalized SC First Bank for violating local banking laws such as the illegal handling of metal loan services to corporate customers. Recently, market rumors have been spreading that the British banking group may consider exiting the South Korean market although Peter Sands, chief executive officer of Standard Chartered, said the group is completely committed to the Korean market.
Standard Chartered acquired Korea First Bank for 3.4 trillion won ($3.1 billion) in April 2005 and renamed it SC First Bank in September of the same year, the largest-ever takeover by the British banking group.
(Yonhap News)
Irked by a management plan to adopt a novel merit pay system, about 2,900 unionized workers at the seventh-largest lender in South Korea have been striking for the past month, the longest walkout in the history of the local banking sector.
They claim the new pay scheme is aimed merely at cutting labor costs and does not jibe with Korean culture. The South Korean unit of Standard Chartered Plc has 6,500 employees, half of which are unionized workers.
Defying criticism of turning a deaf ear to the Korean culture of respecting seniority, the management is determined to adopt a performance-based pay system, which it says will help provide better services to customers by bringing in competition in the fast changing local banking sector.
SC First Bank is the first lender operating in South Korea that seeks to overhaul the seniority-based salary scheme.
Market experts said the bank’s ongoing labor strike points to cultural conflicts stemming from a lack of understanding between a foreign owner and bank workers. They said the tension came as the management failed to find common ground and is trying to push for global standards for Korean bankers who are accustomed to the seniority-based pay system culture.
“From the perspective of foreigners, the adoption of the performance-based pay system is inevitable to boost competitiveness,” said Shim Kyu-sun, a bank analyst at Hanwha Securities Co. “But in the Korean banking industry which has the conservative culture, the bank’s push for the new scheme cannot but have helped to spark conflicts.”
The prolonged labor strike has forced the lender to temporarily shut down about 10 percent of its nearly 400 branches, causing bank customers to face inconveniences and sparking concerns about their deposit withdrawals.
Amid deepening tension between the two parties, four labor representatives flew to London on Saturday to visit the headquarters of Standard Chartered to stress the legitimacy of the walkout.
On Monday, Richard Hill, chief executive officer at SC First Bank, expressed his “deepest regrets” over the inconvenience and concerns caused by the labor strike and pledged to “do everything possible to seek an early resolution of the strike.”
Hill expressed hopes that the labor union will return to the negotiation table within this week and the bank has no plan to take harsh measures like the closure of other branches as it wants to resolve the dispute quickly through dialogues.
But the head of SC First Bank is adamant in stressing the need to introduce a performance-based salary system as the bank cannot continue to pay out high salaries without the bank’s growth.
A bank analyst, asking not be named, said it is not easy for a foreign lender to gain firmer footing in the Korean market as the global norms sought by global banks sometimes do not suit Korean culture or sentiment.
But Shim at Hanwha Securities also said that even if Korean banks try to push for a merit-based pay system like SC First Bank, their unionized workers might be angry, adding that some performance-based schemes tailored to the Korean culture are needed to raise banks’ overall competitiveness.
Market watchers also expressed concerns that the prolonged labor strike would dent the bank’s business and hurt its reputation, which has been already hit by the rumors of its withdrawal from the Korean market and the regulator’s recent punishment of the bank.
In July, the financial watchdog penalized SC First Bank for violating local banking laws such as the illegal handling of metal loan services to corporate customers. Recently, market rumors have been spreading that the British banking group may consider exiting the South Korean market although Peter Sands, chief executive officer of Standard Chartered, said the group is completely committed to the Korean market.
Standard Chartered acquired Korea First Bank for 3.4 trillion won ($3.1 billion) in April 2005 and renamed it SC First Bank in September of the same year, the largest-ever takeover by the British banking group.
(Yonhap News)
