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
Showing posts with label Samsung. Show all posts
Showing posts with label Samsung. Show all posts
Wednesday, December 3, 2008
Tuesday, April 8, 2008
Spotlight: Samsung Electronics (July 24, 2007)
Originally published in the July 24, 2007 issue of In Focus, Governance Metrics International’s newsletter.
Spotlight: Samsung Electronics
South Korea’s most famous blue chip company, Samsung Electronics, has suffered a spectacular decline in value over the last two years. While the KOSPI composite index rose by 27 percent over the last year, Samsung’s shares fell 4 percent. Samsung used to dominate the Korean exchange with 25 percent of its total market capitalization. Today, Samsung accounts for only 8 percent of the market capitalization of the Korean bourse.
Governance is an issue here. Although the company blames the usual culprits of low-cost competition from China and irregular dynamics in the memory chip market, Samsung’s problematic governance is a likely additional drag on share price performance. GMI currently rates Samsung 2.0 on a scale of 1.0 to 10.0, with 10.0 being the highest relative to other emerging market companies, and 1.5 globally. GMI also has flagged the company in three out of six research categories.
Samsung’s governance structure is marked by a web of cross-holdings which ensure the control of the Lee family over the Samsung conglomerate. The Lees’ influence was evident in January 2007, when the company appointed Lee Jae-yong, the 39-year-old son of the family patriarch, to the newly created position of chief customer officer. The appointee’s prior business experience was a failed internet venture. In May 2007, the Seoul appeals court upheld the convictions of two executives of a Samsung affiliate for breach of their fiduciary duties because they helped Mr. Lee Sr. transfer control of the company to his children. These and other governance issues not only hamper the ability of outsiders to exercise control over the company, they also act as disincentives to challenge the company’s internal dynamics, which will be necessary to spur product and marketing innovations.
South Korea’s largest daily newspaper, Chosun Il Bo, quoted an anonymous Samsung executive on July 13 as saying that U.S. investor Carl Icahn might make a hostile takeover bid for the company. Samsung’s stock rose on this news, despite a 36 percent fall in quarterly operating profit announced the same day. On July 17, Icahn denied the report as “erroneous rumors.”
Spotlight: Samsung Electronics
South Korea’s most famous blue chip company, Samsung Electronics, has suffered a spectacular decline in value over the last two years. While the KOSPI composite index rose by 27 percent over the last year, Samsung’s shares fell 4 percent. Samsung used to dominate the Korean exchange with 25 percent of its total market capitalization. Today, Samsung accounts for only 8 percent of the market capitalization of the Korean bourse.
Governance is an issue here. Although the company blames the usual culprits of low-cost competition from China and irregular dynamics in the memory chip market, Samsung’s problematic governance is a likely additional drag on share price performance. GMI currently rates Samsung 2.0 on a scale of 1.0 to 10.0, with 10.0 being the highest relative to other emerging market companies, and 1.5 globally. GMI also has flagged the company in three out of six research categories.
Samsung’s governance structure is marked by a web of cross-holdings which ensure the control of the Lee family over the Samsung conglomerate. The Lees’ influence was evident in January 2007, when the company appointed Lee Jae-yong, the 39-year-old son of the family patriarch, to the newly created position of chief customer officer. The appointee’s prior business experience was a failed internet venture. In May 2007, the Seoul appeals court upheld the convictions of two executives of a Samsung affiliate for breach of their fiduciary duties because they helped Mr. Lee Sr. transfer control of the company to his children. These and other governance issues not only hamper the ability of outsiders to exercise control over the company, they also act as disincentives to challenge the company’s internal dynamics, which will be necessary to spur product and marketing innovations.
South Korea’s largest daily newspaper, Chosun Il Bo, quoted an anonymous Samsung executive on July 13 as saying that U.S. investor Carl Icahn might make a hostile takeover bid for the company. Samsung’s stock rose on this news, despite a 36 percent fall in quarterly operating profit announced the same day. On July 17, Icahn denied the report as “erroneous rumors.”
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