The Forgotten Stakeholders?

Whenever you have two flagship research projects there is always a fear that the results from one will contradict the findings from the other. This might be due to differences in the sample mix, the way the questions are phrased, the environment at the time the research was conducted or any one of dozens of other factors.

However, when two separate studies return broadly similar results, it’s probably time to sit up and take notice.

Back in September 2006, the Edelman Asia-Pacific Stakeholder study suggested two things:

  1. Employee development/Employee benefits are the most important standout characteristic of companies operating in Korea (41% of respondents agree that it is the first thing they notice).
  2. Korean companies are not even close to meeting the expectations of stakeholders in the extent to which they communicate with employees (54% of respondents said that Western companies lived up to their expectations in terms of employee communications, 26% felt that Japanese companies do and only 9% believed that Korean companies live up to expectations).

Then the 2007 Trust Barometer shows that 58% of respondents in Korea believe that “Listening to employees” is the most important action that a global company can take to build trust among its workforce and that 56% of respondents feel that “Fair treatment of employees” is the most important activity for a socially responsible corporation. 72% of respondents said that “Unethical labor practices” would undermine trust in a company.

To anyone who has spent any time working in or with major Korean companies, it is immediately apparent that the Human Resources Division exercises extraordinary control over the workforce; setting and maintaining salary levels, managing the complex hobongsystem of seniority-based promotions and generally directing the individual’s path through the company hierarchy. Companies also spend a lot of time and effort on internal “M/T” social weekends, employee songs, slogans and rallies and other activities, so how come people think that Korean companies need to improve their employee relations?

According to the Trust Barometer findings, companies that communicate their financial performance and business approach to employees will do a better job of building trust that those who don’t. Demonstrating social responsibility is the fourth item on the list. At the bottom of the list is “Providing information about career advancement.”

The Korean Labor Institute, in its publication on “The Transformation of Industrial Relations in Large-size Enterprises in Korea,” says:

[T]he low level of complementarity between corporate governance and employment relations explains the antagonistic pattern of labor relations in large firms in Korea. … Korean firms tend to have low “sharing structures” where stakeholders (both shareholders and employees) have very little voice in decision making. …[L]ine managers do not have the freedom to develop appropriate IR and HR strategies. And workers tend to be treated like servants rather than stakeholders.

The implication here is that barring a drastic change in corporate governance structures that separate ownership from management, there will be little opportunity for stakeholders to have their voice heard, and little opportunity for the “professionalization” of labor relations management in these large firms. Such “professionalization”, which involves the separation of ownership from management, could result in the evolution of more collaborative (and participative) managerial styles.

Edelman’s research clearly indicates that employees are asking to be treated more as stakeholders in the business than as “wage slaves.” Companies – Korean and Western – that look for opportunities to engage employees in an open dialogue about the direction of the business will build stronger relationships than those that consistently ask for “support and understanding” while demanding more and more sacrifices.

The days when Korean people could be asked to work hard for the good of the country are receding into the past. Korean workers still have very high levels of loyalty, but that loyalty increasingly needs to be vested in the company and based on an environment of trust-based communications.

Of course, moving to this more engaged level of employee relations will not happen overnight and will not be cheap. However, when you consider that a regular employee is considered a more credible voice of the company than the CEO (44% compared to 39% according to the Trust Barometer) then it suddenly begins to seem like an investment that responsible corporations ought to make.

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One Response to The Forgotten Stakeholders?

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