Coupang IPO overshadowed by worker deaths

Bom Kim, the founder of Coupang, South Korea’s response to Amazon, expects his company to exceed a valuation of $ 50 billion when it listing in New York this week.

But back in Seoul, far from the glitz of the initial public offering, the e-commerce company, backed by SoftBank, Sequoia and BlackRock, faces political pressure and police investigations into a spate of injuries and deaths among its workers. .

According to Korean politicians and the country’s civil service and transport workers’ union, eight Coupang employees have died in the past year from overwork.

This included two Coupang employees who died over the weekend, the union told the Financial Times.

In response to the death of a delivery driver on Saturday, the company said: “The deceased worked about four days a week on average and about 40 hours in the past 12 weeks,” adding that his last day of work was on the 24th February. .

“The company will actively cooperate in the process of determining the cause of death and will spare no effort to provide all the support necessary to alleviate the pain of bereaved families,” added the company. “Coupang will also strive to protect workers’ health and safety even more fully.”

Coupang declined to comment on the more general allegations.

The company has turned down repeated requests from the FT for interviews over the past two years.

Analysts said while the issues were unlikely to dampen investor enthusiasm for this week’s IPO, they raised questions about the sustainability of Coupang’s long-term growth.

“Investors are not paying much attention to Coupang’s workforce issues yet, although there are certainly issues with the workload and labor intensity and its bad. treatment of workers, ”said Yoo Seung-woo, analyst at SK Securities.

Workers wearing face masks pack fruit at a Coupang Corp distribution center. in Bucheon, South Korea © Bloomberg

In its IPO prospectus, Coupang warned that some of its activities were “subject to certain detailed and complex laws and regulations on fair trade, labor, employment and occupational safety, which continue to evolve. and which have and will continue to affect our operations and financial performance. , could expose us to costs and penalties and affect our reputation ”.

Coupang praises its technology

Kim, a 42-year-old Harvard dropout, started Coupang as a site offering deals to group buyers. With aggressive marketing and cheap deals, it became extremely popular and was the best app in the Google Play Store in Korea last year.

In recent years, Kim has invested heavily in building a logistics network of 100 distribution centers in 30 cities. Coupang now boasts that almost 100% of its orders are delivered the same day or the next day.

The company says this network allows it to outperform fierce rivals, such as Gmarket and Auction, owned by Ebay, and traditional Korean retail giants including Lotte and Shinsegae.

Korean union activists have drawn parallels between Coupang and Amazon, but say Coupang’s operations are much less automated than those of the Seattle-based e-commerce group and are much more dependent on manual workers. They added that Coupang’s biggest innovation was using data and artificial intelligence to find ways to squeeze these workers.

Go Geon, a former worker at the company’s warehouse in Bucheon, southeast of Seoul, tore his left tendon while rushing with a box to one of the company’s warehouses, and his director asked him not to press charges. “Hamstring injuries usually happen to professional athletes,” he said, but added that these injuries “are now part of the job.”

According to warehouse workers, if they fall behind on hourly goals, they face public shame – and the goals keep increasing. In particular, workers said there was a huge effort to speed up work when Coupang introduced same-day fresh food delivery in April 2020.

“The company’s obsession with efficiency damages the health of workers. Its innovations are the result of pushing workers to extremes, ”said Ryu Ho-Jung, a lawmaker from the Progressive Justice Party. “If this situation persists, we will see more workers die.”

South Korea’s Ministry of Labor conducted a three-month investigation into Coupang’s logistics network last September and said it found workers needed more breaks and more safety education . He called for medical examinations for the night shift staff.

“We are watching with concern the working environment of the company,” said a ministry official, adding that the ministry had met with Coupang executives last month and asked them to remedy the problems.

Businesses exploit loopholes

South Korea has strict labor laws for full-time workers, including a maximum 52-hour work week, mandatory one-hour breaks during an eight-hour shift, and mandatory medical insurance for workers. work accident.

But the laws don’t apply to temporary workers without contracts, and unions say there are many loopholes. Korean courts have tended to side with companies rather than workers, although Samsung workers who contracted cancer while making chips recently won a landmark case.

A Coupang employee unloads an eco-friendly bag carrying fresh food from a delivery truck in Bucheon, South Korea,

A Coupang employee unloads an eco-friendly bag carrying fresh food from a delivery truck in Bucheon, South Korea, © Bloomberg

Seventeen couriers from other Korean delivery companies, who often work up to 90 hours a week on commission, have died of overwork in South Korea since the start of last year, according to the delivery workers union. Coupang’s delivery drivers are full-time employees and the company has said it is meeting the 52-hour limit.

But in its warehouses, 90 percent of workers are day laborers or on short-term contracts, a higher share than its rivals, according to labor researcher Jang Kwi-yeon.

“One of the biggest complaints we constantly hear from warehouse workers is that their workload at Coupang is much heavier than that of its e-commerce competitors,” she said.

Coupang said it increased its warehouse workforce by 78% and invested more than Won500bn last year in automating its facilities to reduce the workload. Nonetheless, the injury rate among its workers has grown as fast as its sales, nearly tripling to 982 between 2018 and last year, according to Korea’s Workers’ Compensation and Welfare Service.

National outcry

In October, Jang Dug-joon, a 27-year-old employee of the Coupang distribution center in Daegu, was found dead in the bathtub of his home shortly after completing his night shift.

A Coupang distribution center building in Bucheon, South Korea.

A Coupang distribution center building in Bucheon, South Korea. © Bloomberg

The case sparked a nationwide uproar over the treatment of workers in the e-commerce sector, which exploded during the coronavirus pandemic. According to a government investigation, Jang had worked more than 62 hours in the week before his death.

Coupang initially denied that Jang died because of his job, but later apologized for his death after an official verdict that he died of overwork. Coupang promised to provide support to his bereaved family, but declined to say whether compensation had been paid.

In January, Choi Kyung-ae died of a heart attack on her sixth day of work in Coupang, after a nine-hour shift in an unheated warehouse, according to the union and her family.

“It was -14 ° C that night. And she had to work in the cold store, relying only on a hand warmer, ”explains Kim Chul-soo, Choi’s brother-in-law. “But the company denies any responsibility and refuses to meet to discuss the problem.” Coupang declined to comment on the matter.

Last month, Joe Nortman, head of logistics operations at Coupang, was called to a parliamentary hearing on working conditions. He apologized for the deaths of Jang and other workers and pledged to improve the working environment of the company.

“I deeply regret all these situations. I think it’s a tragedy every time there’s a death, whether it’s work-related or not. And I think we will continue to do our best to improve. . . I think the results need to improve. And we’re committed to making it happen, ”said Nortman, who worked for companies like JCPenny, Amazon and UPS before joining Coupang.

Kim, the founder of Coupang, boasts of being the number one job creator in the private sector, adding 25,000 new jobs last year. But unions and union activists say day workers or temporary workers in Coupang suffer from a lack of job security and are therefore unable to speak out collectively against the labor practices and working conditions of Coupang. the company.

According to the Coupang Drivers Union, average individual deliveries rose to 340 per day in February 2020 from just 57 packages in 2015, but union members say their wages have stagnated. And more than 90 percent of Coupang’s drivers quit within a year due to excessive physical labor, the union said. Coupang declined to comment on the union’s claim.

A delivery driver working in Seoul’s northern suburbs, who asked not to be named, said he did not have time to eat during night shifts that involve delivering packages to around 150 locations.

“It’s not at all surprising that your colleague doesn’t show up the next day. You just assume he quit because the workload is so unbearable. I don’t know how long I will be able to resist this, ”he added.

Coupang has promised $ 90 million in stock options to its frontline workers and non-management employees, according to the IPO prospectus. But some workers said they were unlikely to be able to stay for the two years needed to fully exercise their right.

“I’m afraid I will die if I work like this every day,” said a 53-year-old worker with the last name Kim at the Deokpyeong warehouse in Coupang.

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