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POSCO AND THANKS SHARING

POSCO management had worked hard since 2011 to infuse the company with the tenets
of conscious capitalism and to make the company a Firm of Endearment.1 Consequently, it
came as an unhappy surprise when, in 2011, it learned the results of a recent New Economics
Foundation (NEF) poll. Despite being a major global economic power, South Korea had been
ranked 68th out of 143 countries in the NEFs Happy Planet Index. Partially to blame,
management thought, was the downside of the countrys rapid economic development: greater
prosperity had created currents of greed and envy within society and some of that had seeped
into the POSCO culture. POSCO wanted to address this negative mindset, not only within the
company but also in the broader society. But how to do so?

POSCO
POSCO was a South Korean steelmaking company that manufactured and sold products
such as hot-rolled and cold-rolled steel, stainless steel plates, wire rods, and silicon steel sheets.
Headquartered in Pohang, South Korea, POSCO had approximately 55,000 employees
(including those employed by subsidiaries) and, in addition to Korea, operated in North America,
India, Japan, China, and elsewhere in the Asia-Pacific region. Roughly 58% of its steel was used
in Korea for, among other things, shipbuilding and automotivethe rest was exported to more
than 60 countries. The company was founded as Pohang Iron and Steel Company in 1968 in an
effort to move South Korea from a primarily agrarian economy to an industrial economy. Led by
Tae-joon Park, a former South Korean general, Pohang Iron and Steel was deliberately located
far from Seoul, in South Gyeongsang Province on the countrys east coast, in order to establish a
South Korean industrial center outside of the countrys capital As the plant was being built,
1

POSCO Family Proclaims to Become a Firm of Endearment, POSCO press release, June 17, 2011,
http://www.posco.com/homepage/docs/eng2/jsp/prcenter/news/s91c1010025v.jsp?idx=1780 (accessed January 7,
2014).

This case was prepared by Jenny Mead, Senior Researcher, Olsson Center; Rajendra Sisodia, FW Olin Professor of
Global Business, Babson College; Dean Krehmeyer, Executive Director, IBiS; and R. Edward Freeman, Elis and
Signe Olsson Professor of Business Administration. It was written as a basis for class discussion rather than to
illustrate effective or ineffective handling of an administrative situation. Copyright 2014 by the University of
Virginia Darden School Foundation, Charlottesville, VA. All rights reserved. To order copies, send an e-mail to
sales@dardenbusinesspublishing.com. No part of this publication may be reproduced, stored in a retrieval system,
used in a spreadsheet, or transmitted in any form or by any meanselectronic, mechanical, photocopying,
recording, or otherwisewithout the permission of the Darden School Foundation.

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Korean workers went abroad, primarily to Japan, to learn the technology involved in operating
the plant. Pohangs first production line was finished in 1973 and had an annual capacity of 1.03
million tons of crude steel. POSCO (Pohangs new name) expanded in the 1980s, building two
steelworks (one in Pohang and one in Gwangyang) that, after a number of subsequent
expansions, could produce 9.1 million tons (Pohang) and 11.4 million tons (Gwangyang) of
crude steel in 2012.
Initially founded by the Korean government, POSCO was state-run until the late 1990s.
By 2000, POSCO was completely privatized, and began building partnerships with other
international steel companies. The company also shed its nonperforming operations and
increased its offerings of value-added steel products.2 After privatization, POSCO found itself
facing stiff competition and worked to move to the global rather than local level of steelmaking
expertise. Through extensive research and analysis, POSCO had identified many high-potential
markets and unmet needs, and consequently it introduced different products that had an array of
new applications. The company set out to learn more about its customers needs, sending
engineers (rather than sales or marketing people) on customer site visits. As a result, POSCO
became much more aware of new product lines it could pursue, such as steel that remained rustfree in saltwater, thus opening up opportunities in vessels and equipment that operated on the
ocean. Simultaneously, the company was instituting technological innovations that vastly
reduced lead times by more than half. After adopting Six Sigma, POSCO realized more than
$2 billion in financial gains from 2006 to 2012.
POSCO was also continually applauded for its strong corporate governance structure.
Some important features of that governance: the company operated under professionals, not
family members; the CEO did not chair the board; the entire audit committee was made up of
outside independent directors; because of its listing on other countries stock exchanges,
POSCOs financial statements had to be prepared using specific guidelines (the United States
Generally Accepted Accounting Principles, for example) that required more disclosure; and the
auditing firm was chosen through open bidding. An indication of the strength of this governance
was that Warren Buffetts Berkshire Hathaway Inc. held a meaningful amount of shares
(equivalent to around 5% of the firm) in 2012.

POSCO: A Culture of Quality and Caring


POSCO excelled not only in the areas of quantitative growth in size and economic value,
but also in dimensions such as social responsibility, environmental soundness, and future value
generated from positive stakeholder relationships. POSCO was considered a gilt-edged
company3 and was commonly regarded as the worlds most efficient and profitable integrated
2

POSCO History, FundingUniverse.com, http://www.fundinguniverse.com/company-histories/posco-history


(accessed December 19, 2013).
3
K. R. Balasubramanyam, POSCO Not Just Orissa, Business Today, May 1, 2001.

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steel producer.4 POSCO made the list of Fortune magazines Global Most Admired Companies
starting in 1999. The company also placed atop Finance Asias Best Managed Companies in
2010. In 2009, POSCO placed 49th worldwide and first in Korea on Forbess Worlds Most
Reputable Companies list, which selected the companies from a survey of local community
residents about the degree of credibility, friendliness, and admiration of the company. Starting in
2005 and continuing through 2012, POSCO was given a high rating for global sustainability by
the Dow Jones Sustainability Index.
In 2003, POSCO enacted a code of conduct to infuse corporate ethics standards in all its
operations and dealings. The company had two mottos: An employee who makes a mistake can
be forgiven, but one who acts unethically will not be tolerated and Do not make any decisions
that violate corporate ethics even if those decisions bring the company more profits. 5
In addition to production and financial success, POSCO was deeply concerned with the
well-being of its various stakeholders and that of humankind in general. According to its 2010
annual report:
Around the world, POSCO contributes to the comfort and improvement of
humankind. We deeply believe in giving back and actively engage in a range of
social services and activities that will benefit local, regional and international
communities. Sharing is rooted in our corporate culture. POSCO is committed to
encouraging a spirit of cooperation and respect in our employees, our business
partners and our communities. We are committed to making a tangible difference
and to being a responsible corporate citizen.6
POSCO also believed in furthering itself as a company that shares the same value and
culture with all its stakeholders, including the society, the base which a company grows within,
partners, all suppliers, investors, clients, employees and the environment, to enhance
competitiveness and contribute to humanity. 7
POSCOs Stakeholders
Throughout much of its existence, POSCO had worked to build excellent relationships
with all its stakeholders. The conscious capitalism movement emphasized the stakeholder
approach, using the acronym SPICEE, which stood for society, partnership, investor, customer,
employee, and environment.
4

Marvin B. Lieberman and Jina Kang, How To Measure Company Productivity Using Value-Added: A Focus
on Pohang Steel (POSCO), Asia Pacific Journal of Management 25 (2008): 209.
5
Background, POSCO website, http://www.posco.com/homepage/docs/eng3/html/company/ethics/
s91a3010040c.jsp (accessed January 7, 2014).
6
POSCO annual report, 2010.
7
http://www.posco.com/homepage/docs/eng2/jsp/prcenter/news/s91c1010025v.jsp?idx=1780.

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Society
POSCO had made contribution to national development a priority, and had supported
social contribution ever since the companys establishment. In 2012, 98% of its employees
volunteered with various social services, donating a total of 622,872 hours of their timean
average of 36 hours per person. The company created the POSCO Scholarship Foundation in
1971 to foster next-generation talent, building 14 elementary, middle, and high schools. In 2004,
the POSCO TJ Park Foundation was established alongside various programs: a public prize and
support for academic, cultural, and social organizations, as well as support for students from
Southeast Asian countries. The company also participated in a microlending project for
underprivileged people in South Korea. In 1986, the company also established POSTECH,
Koreas first research-oriented university that in the 21st century was recognized as a top-tier
university in the fields of science and technology. Creating sustainable jobs for socially
underprivileged people in an age of jobless growth was an important step toward achieving
balanced and sustainable development. Thus POSCO launched four social enterprises:
POSWITH, POSecohousing, POSPLATE, and Songdo SE, the last of which was an initiative to
help and hire disabled people. These social enterprises provided stable employment for the
disadvantaged, including single mothers, the elderly, North Korean defectors, disabled people,
and the unemployed. More than two-thirds of the profits of those social enterprises were used to
create new jobs for the socially vulnerable. In 2012, POSCO donated a part of those companies
shares to local NGOs for better governance of and social benefits for the local community.
Partners/suppliers
A constant problem that many suppliers had was the delay between providing the goods
or work and receiving compensation. This lag time could stress the suppliers in many ways; even
larger suppliers that possessed economies of scale were not exempt from this problem. Starting
in 2004, POSCO instituted a policy of paying its suppliers in cash within three days of delivery.
These suppliers could then pay their suppliers on time, and thus all companies maintained
healthy cash-flow equilibrium. POSCO had also instituted a certified partner program for
suppliers that adopted leading-edge technology, maintained cost-effectiveness and on-time
delivery, and continually worked to improve and innovate their operations. The company also
created Koreas first benefit-sharing plan with its top suppliers. Over the years, $119 million of
profits went to these suppliers, and in 2010, the program was expanded to include additional
suppliers.
Customers
From the start, POSCO, led by Tae-joon Park, was intent on producing high-quality steel
in order to compete with other countriesparticularly Japan, which had a high steel output. One
story told of Park, after noticing defective steel coils coming out of production, doing his
research. When he learned that the mill manager had a low golf handicap and enjoyed the

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companys six-hole course, he demoted him and every manager with a low handicap. I thought
the job was too difficult for someone focused on golf, said Park. 8 Park was known to have
defective concrete footings dynamited, after which he apparently made the managers responsible
for the defects break the remaining rubble up with sledgehammers.
Employees
Traditionally, POSCO had treated its employees well, paying them above-average wages
and providing generous benefits and vacation time. Tae-joon Park made sure laborers had
restrooms as nice as those in a hotel; workers in a clean environment will make clean steel. 9 In
1995, the company established the POSCO Educational Foundation to support the education of
employees children. The company offered employees a benefit-sharing plan. POSCO offered
day care, extended maternity leaves and mentoring programs for women, and received a familyfriendly-corporation designation by South Koreas Ministry of Gender Equality and Family.
POSCO was strongly committed to developing employees skills, talents, self-realization, and
autonomy, and to helping them maintain a healthy work-life balance.10
Environment
Tae-joon Park, in building POSCO, was environmentally friendly before it was
fashionable. He had trees and flowers planted throughout the company grounds. Under his
guidance, POSCO spent $1.25 billion for anti-pollution devices before the government
demanded pollution control.11 Over the years, POSCO planted more than two million trees.
Being green could be difficult for an energy- and natural resourcesintense industry such as
steel. Unlike most other steel companies, POSCO began releasing a separate carbon report in
2009 that featured independent third-party verification of data. To minimize the effects of its
operations on the environment, POSCO instituted a number of programs designed to strategically
manage carbon. Aside from the groundbreaking FINEX technology, these included the
development of a high-tension, lighter-weight steel to be used in automobiles in order to enhance
fuel efficiency and reduce the levels of CO2 and sulfuric acid emissions, and the establishment of
a green partnership program designed to impart its environmentally friendly practices to other
companies. Wanting to bring employees and their family members together, POSCO launched a
green walk campaign in 2011; the goal was to promote adoption of a greener lifestyle, reduce
energy consumption, and lower greenhouse gas emissions.12

Damon Darlin, Korean Steelmaker Sets Global Example, Asian Wall Street Journal, January 23, 1992.
Darlin.
10
POSCO annual report, 2011.
11
Darlin.
12
POSCO, Carbon Report 2011, http://www.iea.org/media/weowebsite/ebc/POSCOCarbonReport2011.pdf
(accessed Apr. 3, 2014).
9

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A Solution? Thanks Sharing


Deeply unsettled by the NEF report, POSCO management set about, in November 2011,
to implement a campaign it called Thanks Sharing. CEO Joon-yang Chung led the voluntary
program by making three daily Thanks phone calls to employees. As one POSCO manager
described it,
An employee working at POSCOs subsidiary company received a special phone
call. How are you? This is Chairman Chung Joon-yang. Chairman Chung read
an article on POSCO Newspaper about an employee who paints pictures on the
walls of the plants. The purpose of this call was to give him some words of
encouragement regarding his great idea. At first, the employee could not believe
Chairman Chung called him and became embarrassed upon realizing. The
employee said that although it had been a short conversation, he could still feel
the Chairmans sincerity and consideration of even the small things relating to
POSCO employees.13
The programs initial exercises and events were small, but they contributed to a more
positive mindset. Several employees subsequently created a 5 Thanks program, in which they
shared with fellow employees five things each day for which they were thankful. One
department even created a Thanks mobile application with which employees could identify
particularly positive employees, who then received a bouquet of flowers each month. The
program continued to grow and, according to POSCO, had enormously positive effects:
improved employee morale and teamwork, greater organizational solidarity, and better
relationships with the companys stakeholders.
POSCO was not, however, content merely to keep the Thanks program internal.
Management encouraged employees to bring the concept into their family life, particularly when
there was discord between relatives. A chronic source of strife in Korean families was the
relationship between mother and daughter-in-law, who often lived in the same house, and the
hope was that the Thanks program would help alleviate some of that tension. Employees
adopted certain tactics they had learned through the company program, including giving their
spouses a list of things for which they were grateful. As another POSCO manager related,
An employee wanted to recover his relationship with his two children and wife.
He decided to write 1000 grateful things to them so he started to pay more
attention to his family. Consequently he found that he was grateful for everything
in his family, and realized that many things he did in his life had been regrettable
to his family. As his wife also joined him in writing 1000 grateful things, they
were able to talk about their happy family for the first time since their marriage.
13

POSCO Case: Thanks Sharing Activities, e-mail from Myung-ho Lee, head of POSCOs social
contribution division, received January 9, 2013.

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Thanks Sharing activities made him realize that a family is priceless and that he
has to work harder and more enthusiastically as the breadwinner of his family. 14
At the beginning of the Thanks Sharing campaign, employees in general were
unenthusiastic. But as time went onand the company created a contest around the activities,
approximately 96% of employees began participating. POSCO included its various
stakeholderseven the machineryin the activities, going as far as putting Thanks stickers on
some of the equipment. Signs such as Fasten your seatbelt were changed to Thanks for
fastening your seatbelt. The general mood in the company improved, and managers noticed
increased self-confidence and a greater sense of pride among their workers.
Much to POSCOs amazement, the Thanks campaign was taken up by the outside
world. The Pohang city government adopted it, as did the school system, the prison, the army,
and the local soccer team, the Pohang Steelers, which began the practice of publicly thanking its
fans for five different things at the start of each game.15 Other companiesincluding Toyota,
Dangsan Steel, Samsung Heavy Industry, and Hyosung Heavy Industryalso adopted the
campaign, sending representatives to POSCO to learn about Thanks Sharing.
In a relatively short time, POSCO had effected change within its organization that
appeared to be taking hold on a much broader level. Management reflected on the program:
In POSCOs Thanks Sharing activities, success comes from bottom-up
management style.rather than from following top-down style. In addition,
because the Thanks Sharing activities were not enforced and management
showed great interest in them, the field employees were willing to practice
voluntarily and develop activities which also spread to other employees.16
POSCO management realized, additionally, that the spread of Thanks Sharing not only
gave POSCO a competitive advantage, but also made it part of a movement for social change,
particularly as it spread through the community and beyond:
POSCO encourages positive thinking and empowerment of employees, offering
them something to be proud of through Thanks sharing activities. Moreover,
POSCO will continue to actively support other Thanks Sharing activities,
promoting them in order to become a company that receives love from the
society, the government, and the public.17

14

E-mail from Myung-ho Lee, January 9, 2013.


The positive effects of the teams efforts seemed to pay off with an improved season, in which its record went
from 5 wins, 6 losses, and 4 draws to 10 wins, 4 losses, and 1 draw.
16
E-mail from Myung-ho Lee, January 9, 2013.
17
E-mail from Myung-ho Lee, January 9, 2013.
15

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