Owners of major domestic petrochemical companies in South Korea have seen their compensation decrease in the first half of this year compared to last year, as the prolonged slump in the petrochemical sector has prompted restructuring and cost-cutting measures.
According to an analysis of semi-annual reports released on August 23, Shin Dong-bin, chairman of Lotte Group, received 1.087 billion won from Lotte Chemical in the first half of this year, down 138 million won, or 11.3%, from 1.225 billion won during the same period last year.
Notably, the decline in Shin's compensation from Lotte Chemical stands out when compared to his overall earnings from the group. In the first half of this year, he earned a total of 11.227 billion won from six subsidiaries, including Lotte Holdings, Lotte Shopping, and Hotel Lotte, which is an increase of approximately 13.6% from 9.881 billion won in the same period last year. While his total compensation from the group increased, his earnings from Lotte Chemical decreased.
At Hanwha Solutions, the compensation for the owner family also saw significant reductions. Kim Seung-yeon, chairman of Hanwha Group, received 1.68 billion won in the first half of this year, a decrease of 841 million won, or about 33.4%, from 2.521 billion won last year.
Kim Dong-kwan, vice chairman of Hanwha Group, also received approximately 1.175 billion won during the same period, which includes a salary of 1.162 billion won and other income of 13 million won. This represents a decrease of about 23.8% from 1.542 billion won in the first half of last year.
In Kim's case, the decline in compensation from Hanwha Solutions is particularly notable compared to other subsidiaries. He received 2.52 billion won from Hanwha Corporation, Hanwha Aerospace, and Hanwha Systems, maintaining the same level as last year. However, his earnings from Hanwha Solutions dropped from 2.52 billion won to 1.68 billion won, a decrease of 840 million won.
Despite the reduction in owner compensation, major petrochemical companies have shown signs of recovery in their performance this year compared to last year. Lotte Chemical reported consolidated sales of 5.6864 trillion won and an operating profit of 110.1 billion won in the second quarter, reversing from an operating loss of 250.5 billion won in the same quarter last year.
Hanwha Solutions also recorded sales of 4.5826 trillion won and an operating profit of 306.5 billion won in the second quarter. Key business segments, including renewable energy, chemicals, and advanced materials, have reported profits for two consecutive quarters, improving overall profitability.
However, industry experts suggest that the improvement in performance this year is largely due to lagging effects from the Middle East conflict and inventory valuation gains, indicating that it may be more appropriate to view this as a temporary effect rather than a fundamental improvement.
Consequently, the compensation reductions in the first half of this year are interpreted as a reflection of the ongoing industry downturn and the compensation policies of each group, rather than the current performance improvements.
An industry insider stated, "Compensation for key executives is determined within the limits set by the board of directors, taking into account factors such as position, leadership, expertise, and contributions to the company. While some companies have seen improvements in performance recently, external uncertainties and global supply-demand imbalances have likely impacted the overall business conditions in the industry."
* This article has been translated by AI.
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