Business Transformation

Samsung Bows to Investors, Considers Revamp

Samsung has bowed to shareholder pressure and kicked off a six-month review of its corporate structure that could lead to the creation of a new holding company, as well as a listing on additional exchanges.

The South Korean technology giant has also promised to appoint new independent board members and increase dividend payments to shareholders.

The plans were announced in an official statement from Samsung Electronics Co. Ltd. (Korea: SEC) just a day after the company was said to be facing mounting pressure from investors to improve corporate governance and shareholder incentives. (See Samsung Under Mounting Pressure to Do Splits – Report.)

Samsung has this year been rocked by reports that a number of its Note 7 devices have caught fire during use. Most airlines now forbid passengers from carrying the infamous "phablets" on board aircraft and Samsung has taken them off the market.

Samsung said a new "roadmap" would build on a shareholder return program announced in October last year and ensure the company was well positioned for future opportunities.

"We are committed to enhancing sustainable long-term value for our shareholders and to remaining good stewards of capital," said Oh-Hyun Kwon, Samsung's vice chairman and CEO. "Today's announcement extends the actions we initiated last year and represents the next phase in the evolution of our shareholder policy and governance."

Among other things, Samsung has hired external advisers to conduct a review of the "optimal corporate structure." It expects the review process to last six months and says it could lead to the creation of a holding company structure -- something a number of investors believe would improve corporate governance and management at the organization.

Samsung is also looking to appoint new independent board members with "international corporate experience," it says. Its board is currently assessing candidates and plans to nominate at least one new board member "with robust global C-suite experience" in time for the next annual shareholder meeting in March 2017.

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Another step will involve the creation of a governance committee -- comprising independent board members -- that will address "board decisions and proposals linked to enhancing shareholder value."

On the dividends side, Samsung will now allocate half of its free cash flow to shareholder returns in 2016 and 2017, having previously promised to pay out between 30% and 50% of the figure.

It also says it will increase total dividends in 2016 by 30%, compared with 2015, bringing the total annual dividend up to 4 trillion won ($3.4 billion).

Samsung's board reckons that to achieve its objectives Samsung will have to maintain a cash balance of between KRW65 trillion ($55.4 billion) and KRW70 trillion ($59.7 billion) in future.

— Iain Morris, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, News Editor, Light Reading

kq4ym 12/12/2016 | 5:02:49 PM
Re: Spin-off which units? The increase in shareholder returns seems like a pretty good incentive to keep them happy and not abandon ship, while the six month study of the organization will stall off any rash changes if in fact there will be any made.
TV Monitor 11/30/2016 | 1:27:05 PM
Re: Spin-off which units? Dan Jones

Lee Family == owns 51% of ==> Samsung Electronic Holdings == owns 51% of ==> Samsung Electronics. After this, Lee family has a shareholder revolt proof control of the Samsung Electronics.
DanJones 11/30/2016 | 11:09:59 AM
Re: Spin-off which units? Huh? Got a link for the report. 

"After the clean up, the Samsung Electronics Holding would own 51% of Samsung Electronics, which in turn be 51% owned by Lee family."


The Lee family and the holding company can't both own 51% each, that's not possible, unless math is different in Seoul!
TV Monitor 11/29/2016 | 10:53:51 PM
Re: Spin-off which units? Dan Jones

According to a detailed report, it will be a paper holding company. The Samsung Electronics will do business as usual, while The Samsung Electronics Holdings would be the new formation.

Currently, there are three "holding" companies of the Samsung Electronics, a zoo, a hotel chain, and a trading firm.

After the clean up, the Samsung Electronics Holding would own 51% of Samsung Electronics, which in turn be 51% owned by Lee family.

So Lee family would control the Samsung Electronics with only a 26% share. The Samsung Electronics is a holding company of other Samsung businesses, which may also move.
DanJones 11/29/2016 | 12:27:54 PM
Spin-off which units? Devices?


Domestic appliances?


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