With Korean companies now incorporating a regular labor adjustment system after experiencing the Asia financial crisis, the purpose of this study is to investigate the effect of corporate governance on labor adjustment. To this end, the 1~2 year figur ...
With Korean companies now incorporating a regular labor adjustment system after experiencing the Asia financial crisis, the purpose of this study is to investigate the effect of corporate governance on labor adjustment. To this end, the 1~2 year figures of the Workplace Panel data of the Korea Labor Institute and the corporate financing data of the National Information and Credit Evaluation Inc. from 1998 to 2003 was collected to conduct an empirical analysis of the effect of corporate governance on labor adjustment on subject samples consisting only of foreign invested companies. According to the analysis, first, the professional management system had a higher labor adjustment range compared to the ownership management system. This implies that professional managers may conduct quick labor adjustment according to business performance in concern of labor market reputation. On the other hand, in an ownership management system, there is a high possibility of adopting relaxed labor adjustment. In examining the samples separately according to the existence or non-existence of a union, in a workplace without a union, the professional management system had a significant (+) effect on labor adjustment, but in a workplace with a union, the professional management system did not influence the range of labor adjustment. This implies that the possibility of a professional manager conducting quick labor adjustment according to business performance in concern of labor market reputation is high in companies without a union, but for companies with a union, instead of raising business performance through labor adjustment, it is likely that management will compromise with the union at a reasonable level or the collective labor agreement of the union will limit the autonomy of professional managers. Second, the larger the foreign shareholding rate, the larger the range of labor adjustment becomes, but in the case of where the purpose of foreign share is to participate in management, it was observed that the range of labor adjustment declines. This suggests that participation of foreign capital to attain short-term stock margin profits increases the employment instability of workers, but in the case of where the purpose of foreign share is to participate in management the employment instability is relaxed. Meanwhile, in the perspective of the existence or non-existence of a union, the change in foreign shareholding rate relatively increased the range of labor adjustment in companies with a union compared to companies without a union. This suggests that companies with a union were over employed compared to companies without a union and that the range of labor adjustment was relatively higher according to increases in foreign shares or that in the case of companies without a union, labor adjustment had been conducted regularly, so despite increases in foreign shares, the range of labor adjustment was low. In the case foreign shares have the purpose of participating in management, the range of labor adjustment is low, but in the case of companies without a union which have been subject to regular labor adjustments, the range of labor adjustment is reduced significantly.