SK hynix (000660.KS) is expected to buy back up to 10 trillion won ($7 billion) in additional shares this year after its management and union agreed on a new pay system that pays part of employee bonuses in company stock. The move ties record earnings from the artificial intelligence chip boom to both a revamped compensation scheme and shareholder returns.
The company said on the 20th that management and the union had reached a tentative agreement on the 2026 wage and collective bargaining terms. Under the deal, profit-sharing (PS) will shift away from a mostly cash-based payout to a structure in which 60% of the PS pool is paid in company shares.
Specifically, 40% of the PS pool will be paid in cash in the same year, and another 40% will be paid in shares. The remaining 20% will also be paid in shares, at 10% a year over two years. Employees may sell the shares they receive immediately.
Share Payout Could Reach 10 Trillion Won If This Year’s PS Pool Hits 25 Trillion Won
The key point is that this year’s expected massive PS pool translates into a large volume of shares to be paid out. Under the standard agreed last year, SK hynix uses 10% of operating profit as its PS pool. Assuming operating profit reaches 250 trillion won this year, the PS pool would be about 25 trillion won.
SK hynix pays out bonuses around February each year. As a result, based on the 40% of the pool paid in shares in the same year, the company needs to secure about 10 trillion won ($7 billion) in shares. This is a separate volume of shares used for bonus payouts, apart from the 40 trillion won ($28 billion) share buyback plan the company announced the previous day.
The agreement is significant because SK hynix and its union changed the direction of the compensation system while the company was posting record earnings driven by the AI chip supercycle. Previously, most of the gains from improved earnings were paid out as cash bonuses, but going forward, a structure has been set up in which employees share in the results based on the company’s growth and stock performance.
For the company, the arrangement reduces the burden of large cash outflows while offering the prospect of shareholder returns through the use of company shares. Employees, in turn, can expect additional rewards tied to the company’s growth and a rising stock price.
Safeguards Against Losses From Stock Declines; Home Loans Set at 200 Million Won for Married Staff
SK Group Chairman Chey Tae-won smiles broadly on Oct. 10 (local time) at a correspondents’ briefing held at the Nasdaq MarketSite in Manhattan, New York, as SK hynix’s American Depositary Receipt (ADR) opened at $170, above its offering price of $149. New York — Correspondent Yoon Kyung-hwan
SK hynix began Nasdaq ADR trading on Oct. 10 (local time). Reuters-Yonhap News
At the “Opening Bell” event held at the Nasdaq MarketSite in New York on Oct. 10 (local time), SK Group Chairman Chey Tae-won (center), SK hynix CEO Kwak Noh-jung, and SK hynix outside director and board chairman Koh Seung-beom, along with other executives and staff, mark the start of Nasdaq ADR trading. Yonhap News
SK hynix has also put in place measures to reduce disadvantages to employees from stock-price swings. The number of shares to be paid will be calculated based on the lowest of the closing prices on the date of the preliminary annual earnings disclosure, the date of the PS cash payment and the date of the share payment.
The wage increase was set at 6.3%, up 0.3 percentage points from a year earlier. Management and the union also agreed to introduce a system that would defer up to 3% of wages if losses occur, after agreeing on measures such as job-security steps to overcome the crisis.
The company also eased the criteria for its in-house home loan program, which had been capped at 100 million won for general employees and up to 200 million won for those with multiple children. From this year, all married employees can receive up to 200 million won.
“This is a case where, with SK hynix’s profits growing amid the AI memory boom, the way bonuses are paid has been changed from a cash-centered approach to one linked to the stock price,” an industry official said. “It could influence the bonus systems of other large companies going forward.”
The tentative agreement is set to be finalized through steps including a vote by union members.