Hanwha Group and LS Group Navigate the RSU System: Strategies and Reactions

Hanwha Group Vice Chairman Kim Dong-kwan (left) and LS Group Chairman Koo Ja-eun (right) / Photo courtesy of each company

Hanwha Group and LS Group are representative companies that have introduced the Restricted Stock Units (RSU) system. Amidst criticism that the RSU system can be used as a means of increasing the ownership of the CEO’s family and transferring management rights, the reactions of the two companies are mixed.

A ‘long term performance’ compensation system… Ensuring continuity of management

RSU is a long-term performance compensation system that pays out stocks if conditions presented by the company are met during a certain period. Unlike performance bonuses that are given in cash at the end of the year or at the beginning of the year or stock options that give the right to buy company stocks at a low price, RSUs provide treasury stocks directly when certain conditions, such as years of service, are met.

In the case of stock options, side effects often occurred when managers focused only on short-term increases in stock prices or made irrational investments. There were also cases of ‘rip-offs’ where executives and employees sold their stocks and left the company when the stock price rose. On the other hand, RSUs are useful in establishing a company’s long-term strategy by setting a long-term transferable time point. The effect of buying back shares is also good because companies need to secure treasury shares to pay as compensation.

Hanwha sets out to explain the ‘convenient means’ debate… Target expansion

Hanwha Group was the first major domestic company to introduce the RSU system in 2020. To this day, it is evaluated as the most active user of RSU among domestic companies. However, controversy arose when it became known that Hanwha Group Vice Chairman Kim Dong-kwan received RSUs worth 20 billion earned, including 166,004 shares of Hanwha Corporation. Attention is drawn to the fact that the RSU system has been used as a convenient way of succeeding management rights. After 10 years, half of Vice Chairman Kim’s RSU will be converted to stock (common stock with voting rights), and the other half will be paid in cash equal to the stock price at a time the payment. This was interpreted as a strategy to increase the succession share ratio through stocks and use the remaining money as a source of inheritance tax.

In response, Hanwha said, “If the purpose is to strengthen management rights, it is more effective to buy holding company stocks with cash as a performance bonus rather than RSUs,” and rejected the claim that RSUs are used as a means convenient for succession as having a weak basis. In fact, the RSU that Vice Chairman Kim received from Hanwha over the past four years is only 0.35% of shares.

He added, “The background for introducing the RSU system is to create long-term management performance and increase corporate value,” adding, “Major shareholders who participate in management are also held to the same standards as the CEO and the managers.” Hanwha expanded the RSUs paid to executives of certain affiliates, including Hanwha Corporation, Hanwha Aerospace, and Hanwha Solutions, to all affiliates and team leader-level employees.

LS disbanded after one year “We need to stop unnecessary misunderstandings”

On the other hand, LS Group decided to abolish the RSU system introduced last year in just one year. This measure is interpreted as a response to criticism that the RSU system is being misused for management succession.

LS Group previously introduced the RSU system in March last year and allowed executives to receive long-term performance compensation linked to stock prices three years later. Chairman Koo Ja-eun and Vice Chairman Myung Noh-hyun are set to receive 27,340 shares and 11,378 shares of stock and stock-value-linked cash, respectively, through the RSU system in April 2026.

Considering the Confucian family tradition of the Pan-LG family and the current internal situation of LS, the RSU system is burdensome. This is because it could become a trigger for controversy in the future. LS Group was largely divided into three groups: LS Co., Ltd., E1, and Yesco Holdings. On the face of it, LS Co, Ltd acts as the representative holding company of the group, but the number of related companies it can directly influence is limited. As each holding company establishes its own management and business system, the possibility of separation is constantly raised. As the issue of the LS Group division of affiliates recently highlighted, the calculations of third generation owners competing for succession have also become more complex. For this reason, even if the share change occurs on a small scale due to RSUs, the impact is much greater. An officer of the LS Group explained the reason for removing the RSU system, saying, “This is to prevent unnecessary misunderstandings.”

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