Employee participation and involvement in korea: evidence from a new survey and field research

Abstract

This paper provides evidence on the incidence, scope and nature of employee participation in Korea. The key findings include: (i) the incidence of works councils (WCs) is higher than in most other countries; (ii) not all WCs are functioning well with a little less than 70% of Korean firms having functioning WCs; (iii) WCs may be a substitute for traditional collective bargaining; (iv) there are complementarities between EI (Employee Involvement) programmes and trade unions (especially FKTU-affiliated unions); between EI programmes and training; and between representative participation at the top and direct participation at the shopfloor; (v) there is evidence of dysfunctional and weak quality circles; and (vi) consistent with our hypotheses, firms with EI programmes (especially effective EI programmes) are generally larger, more capital intensive, spend more on training and more productive than other firms. Finally, we use qualitative data from two large manufacturing firms to explore further the use of employee participation and involvement programmes in Korea.

Keywords:

• Employee participation
• works councils
• quality circles

Acknowledgements

The authors are grateful for support from the Korea Labor Institute. The bulk of the paper was written while Kato was Distinguished Visiting Professor at KDI School of Public Policy and Management in the summer of 2004. Kato is thankful for their hospitality. The paper has benefited from comments and suggestions from conference participants and in particular Dong-Bae Kim, Sam-Su Kim, and Yong-Jin Ro at the Workshop on Employment Practices in Korea at KDI School in July 2003, as well as participants (especially the authors' discussant, Jiman Lee) at the KLI-KDIS Conference, Flexibility and Performance: International Perspectives on Labor Market Institutions, 19–20 July 2004, Seoul, Korea. Jong-Kyu Lee provided excellent research assistance. Finally, the authors owe their great debt of gratitude to the HR managers, line supervisors and union officials of Korean companies who granted them the opportunities to interview them.

Notes

¹For a survey of the literature on employee involvement and participation see Levine (1997) on teams; on information sharing see Kleiner & Han (1997). For a survey of the literature on financial participation schemes, see for instance Kruse & Blasi (1997) on employee stock ownership and Jones et al. (1997) on profit sharing, gain sharing/team incentives. For a Meta-analysis of the literature, see Doucouliagos (1995). Finally, Gibbons (1997) and Prendergast (1999) provide an insightful survey of the theoretical literature.

²The recent English-language literature on NICs includes Cin & Smith (2002) on employee stock ownership in Korea; Kato et al. (2004) on various financial participation schemes in Korea; Nam (2002) on works council and other employee involvement in Korea; Chow (2002), Chow & Ng (2002) on high-performance work practices in Hong Kong, Korea and Malaysia; and Bae & Lawler (2000) on high-performance work system in Korea. In addition, we recently became aware of an exciting ongoing research project on high performance work systems in Korea. A working paper providing preliminary findings from the project was presented at the IIRA 5th Asian Regional Congress in Seoul, Korea on 23–26 June 2004 (Lee et al., 2004). Our paper is complementary to their working paper. First, we use data from a different survey with a higher response rate that focuses more on representative participation than the survey they used. Second, as a result of the representative participation focus of our data, we address important issues of complementarity between representative participation at the top and direct participation at the bottom; and the role of trade unions in employee participation in Korea. Third, our paper combines quantitative evidence from the survey data with qualitative evidence from our own field research.

³Freeman et al. (2000), one of the better-known examples of work using firm-level survey data, used the Human Resource Practice Survey of member firms of the Society of Human Resource Management in the US and the survey's response rate was 11%. The Human Resource Management Survey of Japanese Firms conducted by Kato & Morishima (2002) received about 20% of all Japanese firms listed in Japan's three major Stock Exchanges. In addition, in June of 1991, the Rengo Sogo Seikatsu Kaihatsu Kenkyu Jo (Rengo Research Institute of (Continued ) General Life Development) in Japan mailed their questionnaire asking questions on labour conditions and employee participation/involvement to 6,800 firms (including both public and private firms in Japan) and received usable responses from 689 firms (a response rate of 10%). In June of 1989, the Japan Productivity Center mailed their questionnaire asking questions on HRMPs to 1,030 firms in Japan and received usable responses from 203 firms (a response rate of 19.7%).

⁴For Japanese WCs, see for example Kato & Morishima (2002) and Kato (2003).

⁵A concise introduction to the legal framework of Korean works councils is available online at http://www.molab.go.kr:8787/English/ladm/ind_rel_lab.jsp.

⁶We repeated the same analysis for the sub-sample of unionized firms only and found that these findings about the changes in the nature and scope of WCs since the Asian crisis are not sensitive to whether we limit the sample to unionized firms only.

⁷The sample of other firms includes not only those with unions belonging to the KCTU but also a very small number of firms with unions that do not belong to either national centre.

⁸In fact, the only statistically significant difference is the use of WCs as a mechanism to share information on employment adjustment, and non-union firms are more likely to agree with the importance of this function of WCs as compared with non-union firms. Likewise, firms with FKTU-affiliated unions are less likely to agree with the importance of this function as compared with firms with more militant unions.

⁹Much of the recent literature in the US as well as in Europe tends to focus on these online and offline teams. For estimates of their incidence in the US based on establishment-level surveys, see for example Osterman (1994), Black & Lynch (2000) and Cappelli & Neumark (2001). For the estimates based on firm-level surveys in the US, see for example Freeman et al. (2000). For estimates based on worker surveys in the US, see for example Freeman & Rogers (1999). For Japan, see for instance Kato & Morishima (2002) and Kato (2003); and for Europe, see for example Gill & Krieger (1999), Sisson (2000), Benders & Huijgen (2001), and Poutsma et al. (2003).

¹⁰Weakening QCs in recent years are not necessarily unique to Korea. Chuma et al. (2005) report a similar finding for Japan.

¹¹See, for instance, MacDuffie (1995) and Ichniowski et al. (1997) for the complementarity between training programmes and EI programs.

¹²Off-JT programmes are defined as education programmes operated by a training organization within or outside the company where the employee temporarily leaves his/her duties whereas formal OJT programmes are defined as a short-term or continuous education programme that requires a detailed planned proposal to the supervisor and assumes that training occurs while each employee performs his/her duty.

¹³Kato & Morishima (2002) provide quantitative evidence for such complementarity in Japan.

¹⁴We are currently collecting data that will allow for such an analysis.

¹⁵Our confidentiality agreements with both firms prohibit us from identifying the specific products they produce.

¹⁶We also gathered much information on financial participation schemes such as profit sharing and team incentives through our field visits. See Kato et al. (2004) for financial participation used by Korean firms.

¹⁷See, for instance, Kleiner & Lee (1997).

¹⁸This practice, although illegal, is occasionally observed in small to medium-size firms with unions in Japan according to Kato's field research in Japanese firms.

¹⁹The importance of such informal and frequent meetings between IR Department and headquarters union office is also reported for Japan in Kato (2003).

²⁰See, for instance, Lee (2004b).

²¹See, for instance, Lee (2004a).

²²Kato (2003) provides evidence from Japan for the importance of unions as a supplier of labour representatives to works councils who can match (sometimes even surpass) management representatives in their competence, commitment and dedication.