Worker strike forces Standard Chartered to shut

REMUNERATION     CORPORATE GOVERNANCE     WORKERS’ STRIKE

South Korea – Forty-three Standard Chartered banking units have ceased operations temporarily with its workers going on strike to protest against the adoption of a new salary system.

SC First Bank, Standard Chartered’s South Korean unit, announced last week that it will shut down 43 of its 392 branches, most of which are located in Seoul, until the workers’ strike ends.

The move to shut its banks was made to avoid over-burdening employees who have not joined the strike, and to allow the bank to serve its customers efficiently.

Some 40% of the bank’s staff has been on an indefinite strike since June 27 to oppose the bank’s attempt to overhaul the existing seniority-based remuneration and implement a performance-based pay system instead.

The adoption of a performance-based pay system could potentially shake up the entire banking sector in South Korea as such a system opposes the tradition of compensating employees based on seniority.

StanChart’s efforts to revamp its pay system comes as the bank sees a need to up the profit of its Korean operations, which made up 6% of the group’s global US$6.1 billion (S$ 7.44 billion) pre-tax profit in 2010. 

Even though performance-related pay is widely accepted in many Korean industrial sectors, unions in the financial sector have vehemently resisted its adoption.

SC First Bank has placed apology ads in South Korea’s leading newspapers last week to garner public sympathy and support in hopes of influencing the outcome of the strike.

Richard Hill, the bank’s CEO, wrote in the apology letter that he would attempt everything “within his power to quickly bring an end to the labour dispute”.

While the labour union stated that it was unwilling to resume negotiations over performance-related pay, Hill has promised to continue extending “an olive branch” by actively offering to resume the talks.

Its online banking and automatic teller machine services will still be in operation even at the closed branches. SC First Bank would also pay for taxis to take customers at closed branches to alternative ones.

There have been a record number of jobs added since the previous year, according to Statistics Korea. The population that is employed has grown by 472,000 last year to 24.8 million in June, due to the strong hiring intentions from the service industry.

The Ministry of Strategy and Finance and the Ministry of Employment have said the positive hiring trends in the private sector are likely to continue beyond July. The government is expected to meet its goal of creating 30,000 jobs in 2011.

The country’s seasonally adjusted unemployment rate was at 3.3% in June, the lowest it has been since last November.

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