Mr. Peter Brooks is the Country Human Resources Officer for Citibank in Korea and co-chairman of the American Chamber of Commerce's human resources committee. As one of the very few HR specialists at foreign-invested companies in Korea, Mr. Brooks is in a unique position to analyze the current labor situation.
What kind of activities and issues does the AMCHAM Human Resources Committee deal with?
The highlight of our AMCHAM committee is an annual HR conference, which we hold around February or March each year. We usually get up to about 200 attendees at the conference and then split into groups which discuss various aspects of the currently "hot" topics. So that's the main event, but then on a regular monthly basis, we organize a breakfast meeting to which we invite guest speakers-from the Ministry of Labor, legal experts from Kim & Chang, or others-who will come and talk to us about whatever the "flavor of the month" is. The labor law reform has been the hottest topic lately. So in the recently-held conference, it was one of our main agenda items.

How are the foreign-invested companies receiving the new labor law?
I would say with some disappointment. First, the reform that was processed through the National Assembly on December 26th was clearly not done in a very acceptable way by anybody's standards. I think it shocked most people, not least of all the Korean people. If the government had done a better job of publicizing and communicating what it was trying to do, I think the average Korean citizen would have understood why there was a need to change, especially with all the alarm bells ringing about the economy, employment, bankruptcies, and so on. I'd say the compromise that was reached in the modified version that was passed just recently may have been too much of a compromise. So to some extent, the new legislation doesn't have the kind of flexibility that I think most employers would want to see. That applies not only to foreign invested companies, but to local Korean companies as well.

What are some of the positive aspects of the new labor law?
To use a common expression, the revised version of the bill was "watered-down" to the extent, certainly from Citibank's point of view, that the things that we were able to do before haven't changed much. An issue like "no work, no pay" was already a part of our policy, although typically local employers and maybe a lot of foreign employers here were still paying people a certain percentage of their wages during a strike. But that has now been codified in the law. Even matters like the layoff situation, as far as I can determine, present nothing dramatically new. You still have to go through all the same kinds of criteria that you had to before the new law. Looking more at the future, clearly things like making it illegal to pay a full time union official is a significant change, but that's not set to take effect until 2002. It never has made sense to have to pay someone's salary whose whole raison d'etre is criticizing management and challenging what the employer is trying to do all the time.

Do you think the new law will serve to improve labor relations?
Frankly, I think that labor relations had already settled down significantly. So I would say in the future there's going to be more of a focus by all employers on trying to build better relationships with their employees. Many Korean companies, to the best of my knowledge, are also trying to make significant developments in matters that are fairly standard anywhere else, like pay for performance.

If not legal reform, what has been the catalyst of change for Korea's labor situation?
Ironically, I'd say that the chaebols are doing the best job of changing the labor scene. I believe that the chaebols recognized long ago that they need to be globalized and internationalized to be competitive and have been doing a tremendous job towards that end. So I think it's really a combination of the government being more understanding of what is needed to help companies do business and the chaebols growing up, maturing, and learning from experience and practices overseas.

So in terms of labor, what are the positives and negatives that a potential investor to Korea should know about?
The positives are that you get a very highly educated, pretty committed and enthusiastic workforce. The other side is that maybe there is not as much flexibility as you would expect from a workforce, certainly not the same legal framework as you would find in most countries, and a kind of collective-type attitude that employees tend to have, part of which stems from the Confucianist culture, which has in a way, made it too easy for unions to form and for employees to get membership, thus resulting in powerful unions and escalating wages.

What can still be done to make the situation better?
I'm not sure legislation is really the answer. I really think what's needed is more of a modification or a growing of awareness of the kind of standards that are required to remain competitive. The whole discussion about quality improvement, reengineering, and productivity gains, are on the right track. We have to all figure out a way to get the productivity level up to the same level as what we're paying. In other words, wages have incredibly outrun productivity gains, and I'm sure that's contributing to the economic problems.

How does a company address such issues?
Organizations have to keep communicating better ways of doing things, develop better processes, use new technology, retrain and redeploy people, and raise employees'skill level. The employees need to be more flexible and more understanding. And that's where the issues come in. The unions have to develop and mature a lot faster than they have so far. The trade unions often seem to behave very much like industrial revolution style unions when they are living in a technocratic period. You know we're not talking about guys who are mining for coal and casting iron ore, we're talking about guys working in the computer age. So one difficulty is bridging that gap. Korea is certainly not a bad place to do business, but it often suffers from its image. So if I were to consult people who were going to invest here, I would say that it is definitely a place where you have to come here to fully understand the reality. There's no question that operating here is sometimes tough. But Citibank is a good example of how, if you are interested in being a part of the future, want to be a part of the wealth of the nation, you've got to be here. But you also have to take the rough with the smooth. You can't expect to make a lot of money and just spend all day counting it. A part of the pain is how you make the gain.