[The INVESTOR] Despite Korean cosmetics brand Nature Republic seeing overwhelming success, with revenue increasing sixfold in six years, the 7-year-old company has been stingy in sharing wealth with its employees.

The unlisted company’s business profits increased by 20 billion won ($17.2 million) between 2010 and 2016, which resulted in the value of Nature Republic CEO Jung Woon-ho’s 73.8 percent hold of company shares surging to 73.2 billion won. 


However, instead of handing out generous bonuses to employees as a sign of gratitude, CEO Jung focused on garnering more company revenue by increasing its entertainment expenses, which are the costs incurred in socialization associated with a business purpose.

Since 2010, the firm’s entertainment expenses has increased over 400 percent, well surpassing the employee benefits and compensation expense rate, which is opposite from the approach taken by competitor companies. 


According to Nature Republic’s auditor report, the company’s entertainment expenses in 2010 stood at 230 million won. Except for the period 2012-2013, this expense has continuously increased for the past six years. Last year, the expense increased by 61 percent to reach a total of 1.2 billion won. Thus, the expense increased by a total of 425 percent over the past six years.

This stands in stark contrast to competitor companies in the same industry. Over the same period, the average entertainment expense of four major cosmetics companies decreased by 6.2 million won or 2.7 percent from 228 million won to 221 million won.

Furthermore, whereas the expense on Nature Republic’s employee benefits increased by 700 million won in the past six years, benefits in eight similar companies increased by an average of 5.2 billion won. Thus, competitor companies invested in their employees over seven times more than Nature Republic.

The yearly increase rate of Nature Republic’s expense on employee benefits stands at 16.6 percent, falling short of the average rate of 23 percent of companies within the same industry.

On top of this, while competitor companies on average increased their total employee salaries by 32.9 billion won a year, Nature Republic only increased theirs by 7.3 billion won.

On the other hand, Nature Republic’s salary increase rate was higher than the average salary increase rate of other companies. For the past six years, the annual salary increase rate of Nature Republic was 24 percent while the rates of other companies averaged at 18 percent.

However, this means that the company’s salaries was extremely low to start with.

Last year, Nature Republic paid an average salary of 40 million won, which is 6.5 million won less than the average salary of competitor companies.

Moreover, when considering the company’s labor income share, which is the ratio of employee compensation to the added value of a company, Nature Republic’s share was an average of 27.8 percent for the past three years, ranking No. 6 out of seven cosmetics companies. This indicates that Nature Republic does not invest in its employees as much as other firms.

In addition, the average working period of Nature Republic employees is shorter than average, which hints at just how much the company is not investing in its employees as those who choose not to continue with the firm might be unsatisfied with working conditions.

Nature Republic employees on average worked for the company for a mere 2 years and 4 months, which is not even half of the average working period of 5 years and 6 months for cosmetics companies.

Moreover, the amount of time Nature Republic’s staff spent with the company is not even one-third the average of 7 years and 7 months spent by those who work for Korea’s leading cosmetics company Amore Pacific

Meanwhile, CEO Jung Woon-ho, who earns a salary that is 4.7 times higher than the average Nature Republic employee, is currently in the middle of an embezzlement and lobbying scandal for having his prison sentence reduced by seeking the help of officials.

In early June, Jung finished serving eight months in prison for gambling billions of won abroad.


By Hong Seung-wan, Cheon Ye-seon, Seo Jee-yeon, Yoon Hyun-jong, Min Sang-seek, Lee Seo-young (theinvestor@heraldcorp.com)