Foreign firms’ remittances cause red faces

Branches of some multinationals send more than their net profits in dividend payments to their head offices.

According to the Financial Supervisory Service (FSS) Monday, IBM Korea and Philip Morris Korea’s dividend ratios stood at 115.1 percent and 111.6 percent, respectively.

This means IBM paid 133 billion won and Philip Morrris 157.1 billion won in dividends, bigger than their net profits of 115.5 billion won and 140.8 billion won.

Spokesmen of the two companies declined to comment.

Amway Korea posted a net profit of 59.6 billion won last year and sent it all to Amway Europe in dividends.

BAT Korea also sent the entire net profit of 12.6 billion won in dividends to Brown & Williamson, its holding company.

IBM Korea reduced the number of employees to 2,242 from 2,506 in 2012 while Amway Korea cut its workforce to 372 from 385.

BAT Korea and Philip Morris Korea also reduced their staff to 758 from 783 and 635 from 647, respectively.

“It’s simply wrong to think all foreign firms are beneficial to the Korean economy,” said Hong Sung-jun, secretary-general of Spec Watch Korea, a non-profit watchdog on speculative investment and corporate activities.

“The authorities should strictly regulate excessive dividend payout practices or they will cause harm to our economy,” he added.

“Basically, there is no fixed and direct regulation on dividend ratios,” an official from the Financial Supervisory Service said. “We can only express our official concerns to a company, if its excessive dividend payout can damage its financial health and hurt its future growth.”

Standard Chartered (SC) Bank Korea and Citibank received a warning from the authorities last year for “excessive dividend payouts” to their overseas headquarters despite poor performances here.

Foreign companies argue that they have the right to decide the level of dividend payout ratios.

“As we are not a listed firm here, we are not subject to any law on dividends,” an official from a foreign firm said. “It’s the decision of our headquarters and it does not violate any rules here.”

Some experts take a cautious approach.

“Of course, excessive dividend payouts can be a problem,” said Yoon Jin-soo, a research fellow at the Corporate Governance Service. “But it’s not right to simply see high dividend payouts of foreign firms as a drain of the national wealth. It is important to consider various factors first to judge whether a dividend ratio is too high or not.” By Kim Tae-jong The korea times