Olsonian theory supposes that when labor unions are organized in an encompassing manner at the industrial and national levels, they can better prevent collective action problems and bring about more stable industrial relations. This theory regards the encompassing labor organization as a positive institution. However, the Korean case shows weak theoretical and empirical relevance for the proposition, as institutionalized talks between government, business, and labor did not contribute to establishing stability in industrial relations. In some respects, the situation only worsened. The Korean case therefore suggests that the optimistic propositions of encompassing organizations of labor require a careful reassessment.