[Editorial] Right use of profits

Minister of Employment and Labor Kim Young-hoon said at a press briefing on May 27 that the ministry would convene a forum to explore the feasibility of a "Korean-style social solidarity wage" aimed at identifying ways to socially redistribute the "excess profits" of large corporations.

Minister Kim’s comments came two weeks after Kim Yong-beom, the presidential chief policy secretary, proposed a “citizen dividend” program to give corporate gains back to the public, saying that “the fruits of the artificial intelligence infrastructure era are not the product of any particular company alone.”

News outlets have interpreted the Labor Minister’s remarks as suggesting that profits should be shared with suppliers and subcontractors, given that existing performance-based incentive schemes have primarily benefited regular employees at large corporations.

However, regardless of whether the proposal is for citizen dividends or for redistributing profits to subcontractors, the two senior officials’ fundamental understanding of corporate profits raises concerns from the standpoint of a market economy.

The idea of “excess profits” is unlikely to resonate with people who are familiar with the principles of a market economy. The term is premised on the notion that there is an appropriate level of profit, an assumption that is at odds with a free-market system. In a capitalist economy, private companies exist to maximize profits, and most people take that as a given.

Companies set their own financial targets and are free to evaluate the results internally, whether they exceed those targets or fall short of them. However, when a third party judges that a company has made excessive profits or interferes in how those profits are allocated, it risks undermining the basic order of capitalism and the market economy.

Minister Kim said that Samsung Electronics’ success today is the result not only of the dedicated efforts of its labor and management but also of the combined efforts of the state and local communities. He said that while Samsung Electronics is a private company, semiconductors have already become a public good in the age of artificial intelligence. However, there is doubt as to whether semiconductors can truly be regarded as a “public good,” and the argument that Samsung Electronics’ massive profits are attributable to the efforts of the government and society appears somewhat strained.

Only three years ago, in 2023, Samsung Electronics’ semiconductor division posted losses for four straight quarters. At that time, neither the government, nor local communities, nor subcontractors shared the losses. However, when profits surged, the government argued that they needed to be redistributed across society, simply attaching the modifier “excess” to the word “profits.” That line of reasoning seems shameless.

Companies already play their social role through tax payments and job creation. Semiconductor companies, in particular, make major contributions to the community through the payment of substantial corporate taxes. While most people acknowledge the disparity between subcontractors and non-regular workers and regular employees at large corporations, it is excessive for the government to go so far as to raise questions about the distribution of private company profits. In principle, it is up to corporate executives and shareholders to decide how profits are used.

By contrast, Industry Minister Kim Jung-kwan delivered a message that differed in tone from that of the Labor Minister. In a social media post on May 29, he said that now is the time to channel semiconductor industry profits into productive reinvestment, adding that Korea should take advantage of the current AI boom to secure growth engines for a major leap forward in its industries. This is the right course of action.

From a corporate perspective, it is entirely natural that profits should be directed toward securing future competitiveness rather than being dissipated through wasteful distribution. Corporate profits are resources that should be used for investment, job creation, research and development, and shareholder returns. It is now time to set aside debates over redistribution and move swiftly toward reinvestment policy and action.