Poor Social Responsibility
A new report indicates that large foreign companies operating in South Korea sent 76 percent of their net profits to their headquarters in dividends but their donation came to a mere 0.05 percent in their combined sales. Accordingly, critics say that the companies are busy sending money to their headquarters but are indifferent about corporate social responsibility.
The corporate tracker CEO Score analyzed dividend and donation trends of over 400 firms – 44 foreign firms and 374 domestic firms, in South Korea belonging to the top 500 in terms of revenue. According to the company on May 11, the 44 foreign firms were found to have paid 75.9 percent of their earnings to shareholders in dividends, with 2.69 trillion won (US$2.39 billion) won out of their combined net profit of 3.55 trillion won (US$3.15 billion) transferred to their head offices
The ratio is 3.2 times higher than the average dividend payout ratio of 23.6 percent for large South Korean companies.
On the other hand, the foreign companies’ donations in proportion to sales was less than half of 0.12 percent of domestic large companies. Their total donations came to a mere 60.4 billion won (US$53.69 million), or 0.05 percent of 115.79 trillion won (US$102.92 billion) in their combined sales.
Volvo Korea posted the highest dividend payout ratio of 192 percent, sending twice as much as last year’s net profits to the headquarters.
Tongyang Life Insurance Co., which was acquired by China’s Anbang Insurance Group, ranked second with 170.2 percent, followed by Toshiba Electronics Korea with 153.5 percent, Continental Automotive System with 149.4 percent, Adidas Korea with 140.1 percent, eBay Korea with 135.6 percent, 3M Korea with 113.7 percent and BMW Korea with 101 percent. All these companies paid dividends larger than their net profits. Heung-A Shipping, whose major shareholder is Fairmont Partners, an investment company located in the British Virgin Islands, posted a loss of 17.1 billion won (US$15.2 million) last year but paid out 600 million won (US$533,333) of dividends.
For donation, FRL Korea, which operates the country’s largest fast-fashion brand, Uniqlo, did not spend a single penny on corporate social giving. Amkor Technology Korea and Nomura Financial Investment spent only 5 million won (US$4,447) and 10 million won (US$88,936) on implementing community improvement programs or giving money to charities, respectively, or 0.0003 percent of their sales, while Styrolution Korea and Korea Nitto Optical spent only 5 million won (US$4,447) on the sector, or 0.0006 percent and 0.007 percent of their sales, respectively. Renault Samsung Motors was also stingy on donations, giving 500 million won (US$44,472), or 0.0008 percent of its sales.
Meanwhile, CEO Score analyzed dividend and donation trends of 32 foreign companies, which close their accounts at the end of December, based on their performances in 2016 and the remaining 12 companies, which close their accounts at the end of March, May, August and September, based on their performances in 2015. It classified them as foreign companies when their largest shareholder is foreign company or their ultimate parent companies are foreign firms.