SEOUL / LONDON (IT BOLTWISE) – The nearly 30% drop in stock options in Korean startups highlights deeper structural problems. The declining number of stock option recipients reflects challenges posed by outdated tax rules and regulatory hurdles. This could significantly weaken the innovative strength of the Korean economy.
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In recent years, stock options have been a key element of Korean startups’ talent strategy. But recent data shows a dramatic 29% decline in stock option recipients over two years. This development reveals deeper structural challenges arising from outdated tax regimes and regulatory hurdles that could threaten the innovative strength of the Korean economy.
The decline in stock options coincides with a continued downturn in venture investment in Korea. In 2021, startups reached record funding volumes of KRW 15.9 trillion, enabling aggressive hiring and incentive programs. But since 2023, high interest rates, economic uncertainty and stricter listing exams have eroded confidence in equity-based compensation.
The declining number of stock option recipients shows that employees are increasingly looking for immediate stability rather than long-term stock gains. This is particularly a challenge for young startups that are competing for talent with large corporations or foreign employers. Without flexible tax mechanisms, startups lose one of their few competitive advantages: shared growth through equity investments.
Industry representatives are therefore calling for reform of tax incentives to maintain the vitality of the startup ecosystem in Korea. Currently, taxation on stock options is often triggered upon exercise rather than upon sale, discouraging both employees and startups from using stocks as an incentive tool. In comparison, models in the US and Europe offer deferred taxation or more favorable tax rates that align incentives with actual financial realization.
The challenge comes at a time when the Ministry of SMEs and Startups and related agencies are promoting programs on digital transformation, AI innovation and global expansion. But maintaining this momentum requires not only technological policies, but also a modern compensation framework that rewards long-term value creation for the innovators and the real people behind these innovations.
Although the Korean startup landscape remains resilient, its incentive structures are showing signs of strain. As funding cycles shift and initial public offerings remain subdued, the government is under increasing pressure to update tax policy and promote a more balanced equity ecosystem. The response of policymakers in the coming year could determine whether the next generation of founders and engineers continue to see startups as engines of personal and national growth or as risky bets with limited returns.
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