How Would SK Hynix's 60% PS Treasury Stock Payment Work? Calculating Cash, Immediate Sales, and Deferred Shares
SK Hynix's proposal to pay 60% of PS in treasury shares is not a finalized payment arrangement, as it was rejected in a vote by the production workers' union on 2026-08-25. Under the rejected tentative agreement, however, PS would have been divided into 40% in cash, 40% in treasury shares paid in the current year, and 20% in deferred treasury shares paid after 1 and 2 years.
One of the most confusing aspects of the latest collective bargaining news is whether '60% in treasury shares' means the entire performance bonus would be locked up in stock immediately, and how much employees could actually receive in cash. Converting the proposed payment structure into monetary amounts makes it much easier to understand.
How Exactly Would the 60% PS Treasury Stock Arrangement Have Worked?
Under the tentative agreement, assuming total PS was 100, 40 would have been paid in cash, 40 in treasury shares during the current year, and the remaining 20 in deferred treasury shares.
The deferred 20% would not have been paid all at once. Instead, it would have been divided into 10% after 1 years and 10% after 2 years. The 40% in treasury shares paid during the current year was reportedly structured so that employees could sell the shares after receiving them.
The proposed breakdown was as follows.
| Share of Total PS | Payment Method | Payment Timing |
|---|---|---|
| 40% | Cash | Paid in the current year |
| 40% | Treasury shares | Paid in the current year |
| 10% | Treasury shares | After 1 years |
| 10% | Treasury shares | After 2 years |
Therefore, the phrase '60% of PS in treasury shares' might suggest that employees would have to hold the entire 60% for an extended period. In reality, the tentative agreement distinguished between 40% in shares paid during the current year and 20% in deferred shares.
How Would the Payments Be Divided if PS Were KRW 100,000,000?
For example, assuming an employee's calculated PS was KRW 100,000,000 before taxes, the payment structure would be straightforward. The following figures are illustrative calculations only and do not represent any employee's actual PS payment.
Cash payment: KRW 40,000,000
Treasury shares paid in the current year: Equivalent to KRW 40,000,000
Treasury shares paid after 1 years: Equivalent to KRW 10,000,000
Treasury shares paid after 2 years: Equivalent to KRW 10,000,000
In other words, the proposal would not have reduced the total PS amount to 40%. Instead, it would have changed when and in what form employees received the same PS amount.
In an earlier agreement, SK Hynix and its unions established a system that allocates 10% of operating profit to fund PS payments. Under the latest tentative agreement, the central controversy focused less on the size of the performance bonus pool and more on the proportion to be paid in cash versus treasury shares.
How Many Treasury Shares Would Employees Receive?
When compensation is paid in treasury shares, it is important to consider not only the monetary amount but also which share price is used to calculate the number of shares.
According to reports about the tentative agreement, the method for determining the number of shares included using the lowest closing price among the annual preliminary earnings disclosure date, the PS cash payment date, and the share payment date.
For example, even if the amount allocated to treasury shares were KRW 40,000,000, a reference share price of KRW 1,000,000 would correspond to 40 shares, while a reference price of KRW 800,000 would correspond to 50 shares.
Therefore, rather than looking only at the monetary value of shares awarded, employees also need to consider that the reference price used to determine the number of shares may differ from the actual share price when those shares are sold.
Would Changes in the Share Price Affect the Actual Value of Compensation?
Once employees receive shares, their actual value can fluctuate with the share price, unlike cash compensation.
Even if an employee receives shares initially valued at KRW 40,000,000, a subsequent increase in the share price could raise the amount realized upon sale. Conversely, a decline could mean the actual sale proceeds are lower than the amount calculated when the shares were awarded.
In particular, the deferred portions payable after 1 and 2 years create a time gap between the award and the point at which employees can convert the compensation into cash. As a result, the key issue surrounding the tentative agreement was not simply the total performance bonus amount, but who would bear the burden of reduced cash liquidity and share-price volatility. The treasury stock payment arrangement was also identified as one of the major issues in the vote held on 25.
Why Could Up to 80% of the 2026 PS Have Been Paid in Cash?
The tentative agreement also included a separate option for its first year of implementation.
For 2026 PS scheduled to be paid in early 2027, employees would have been allowed to choose cash instead of the 40% portion normally paid in treasury shares during the current year. Adding that optional 40% to the standard cash portion of 40% would have allowed employees to receive up to 80% in cash.
For example, if PS were KRW 100,000,000, the standard arrangement would provide KRW 40,000,000 in cash and KRW 40,000,000 in treasury shares during the current year. However, if an employee met the first-year eligibility conditions and chose cash instead of the share portion, the employee could have received up to KRW 80,000,000 in cash during the current year.
The remaining 20% would have been deferred, with 10% paid after 1 years and 10% after 2 years.
However, the final agreement would determine which employees could exercise the cash option and under what conditions. Because the tentative agreement itself was rejected, employees should not assume that its original terms will be implemented unchanged.
The 60% Treasury Stock Payment Has Not Been Finalized
The most important point is that the arrangement described above has not been approved for implementation.
SK Hynix's production workers' union rejected the tentative agreement on August 25, with 7,510 votes in favor and 7,535 votes against. Further negotiations between management and labor are expected, meaning the cash proportion, treasury stock proportion, employee options, and deferral arrangements could all be revised.
In addition, the technical and office workers' union conducts its negotiations and voting procedures separately from the production workers' union. Therefore, the result of one union's vote should not be interpreted as the final outcome for all SK Hynix employees.
Accordingly, rather than treating the currently reported 40, 40, 10, and 10 proportions as finalized terms when calculating actual performance bonuses, employees should first check the revised tentative agreement following renegotiations and the results of the subsequent union membership vote.
What Should Employees Ultimately Check?
When evaluating the proposed PS treasury stock arrangement, it is essential to distinguish between 'how much performance bonus will be awarded' and 'when that compensation can be converted into cash.'
Under the tentative agreement, total PS would have been divided into 40% in cash during the current year + 40% in treasury shares during the current year + 10% in treasury shares after 1 years + 10% in treasury shares after 2 years. During the first year of implementation, eligible employees would also have been able to choose cash instead of the 40% in current-year treasury shares, allowing cash payments of up to 80%.
However, as of 2026-08-25, the tentative agreement has been rejected. To calculate the actual amount each employee would receive, it will be necessary to check whether the scope of the cash option, the proportion paid in treasury shares, the deferral periods, and the reference share-price calculation method remain unchanged in any newly proposed agreement.
※ This article is provided for informational purposes to help readers understand market developments and does not constitute an investment recommendation regarding any particular stock or asset. Individuals are responsible for their own final decisions and investment risks.