Samsung Quietly Demands Regulatory Changes to Keep Its Governance Intact

Samsung Group, South Korea’s largest chaebol (family-controlled conglomerate), is quietly requesting regulators, policymakers and legislator that holding-company regulations be amended in a fashion that will leave the current governance of Samsung Electronics Co., Ltd (KSE: 005930) intact, daily Hankyoreh reported on Dec. 3.

"I have learned that Samsung has been contacting the Finance Committee of the National Assembly, the Fair Trade Commission and lawmakers of the governing Grand National Party to rewrite a bill to exempt Samsung Electronics from some clauses governing holding companies,” a government source said on condition of anonymity.

Currently Samsung Life Insurance Co., Ltd., the mutual insurer of the conglomerate, owns about 7.2% of Samsung Electronics common stock and is the largest shareholder of Samsung Electronics. The insurer is majority held by the founding Lee family and Everland Samsung, the amusement park operator, which is the backbone of the conglomerate’s complex web of cross shareholdings. The conglomerate’s shift to a holding company would mean that the insurer will be a subsidiary of Samsung Everland and that Samsung Electronics will be a subsidiary of the insurer.

The current regulations do not allow a financial unit of a chaebol to directly own a non-financial unit of the same chaebol. A legislation bill, which is currently under consideration at the National Assembly, also places ownership restrictions on financial units of chaebols regardless of whether they own stakes in non-financial units as part of cross shareholdings or as part of a holding company. Samsung wants the restrictions relaxed or removed. Samsung Group denied Hankyoreh’s exclusive report as groundless, citing that there have been no group-wide lobbying efforts for the amendment bill. However, a Samsung spokesperson said: “However, legal counsels or strategic planners of each affiliate [of Samsung Group] can express their opinions about the bill.”

Translated and edited by Kap Seol