March 05, 1999 in Social Responsibility News

SAMSUNG Electronics Announces "Open-style Management" in Favor of Minority Shareholders

Seoul, South Korea - March 5, 1999 - Samsung Electronics has publicly announced its intentions to be an "open company" that can be judged by domestic and foreign shareholders, investors and clients to be up to world standards not only in technology but also in operational transparency.
In advance of the annual shareholders' meeting, a special session of the Board of Directors (BOD) convened on March 5. The Board affirmed their intention to make operations at Samsung Electronics, the nation's leading manufacturer, transparent to investors and shareholders at home and abroad. They recognized that people are demanding open-style management now more than ever. In response, the Board members drafted a proposal to amend the Articles of Incorporation in favor of minority shareholders. Among other things, the amendments allow (1) the formation of a committee that allows shareholder representatives to directly recommend some of the external board members, and (2) mid-term dividends to be paid. The proposal will be presented at the 30th annual shareholders' meeting for a vote of approval.

The proposed revisions to the Articles of Incorporation will greatly accommodate minority shareholders as well as major domestic and foreign shareholders. Shareholders insist "Only when Samsung Electronics enacts transparent management will it be judged to be a world-class corporation." The company side, too, is resolved to reflect this sentiment as much as possible in its policy to put shareholders first.

The main Articles of Incorporation clauses targeted for revision with respect to improving minority shareholders' interests are:
(1) shareholders, in principle, will have the first priority in allocating new issues of convertible bonds and bonds with warranty (BW) for stock rights,
(2) the ceiling on the number of external Board members will be abolished,
(3) the BOD will be held responsible for the actions of the Management Committee,
(4) shareholders' rights will be clarified to better protect minority shareholders and top management will defer to shareholders' rights, and
(5) mid-term dividends will be paid to shareholders.

Also, there is the longstanding issue of the tolerance of intra-group transactions within the corporate structure among Korean companies. Unfair insider trading will be clearly prohibited in the Articles of Incorporation. BOD approval will be required for major product transactions (above 5% of the total sales) among affiliates that are not vertically-integrated with Samsung Electronics' business activities. The Fair Trade Committee will, in accordance with relevant laws, stem the flow of unfair insider information among designated corporate groups, companies, and specially connected companies and individuals.

Vice President of the Corporate Communications Team, Il-hyung Chang comments about the BOD resolution, "This decision was agreed upon by the members of the Management Committee after much debating. Although the proposed measures pose difficulties to our management, we believed that operational transparency and protection of shareholder's rights were the more important factors in sustaining Samsung's competitiveness in the near future."

In order to accommodate our minority shareholders' demands for rights and operational transparency, this pivotal decision was made by the Management Committee despite expected future difficulties within operations."

In spite of Korea's current economic problems, Samsung Electronics has laid the groundwork for realizing long-term goals and a sound financial structure through the kind of reforms and restructuring that will earn it recognition as a first-rate company. Samsung has secured strong international competitiveness by developing marketing capabilities based on brand strength and new technology development.

Last year, Samsung Electronics secured world-leading technology and product competitiveness through its development of TFT-LCDs, digital TVs and Rambus DRAMs. Bold restructuring measures have been taken such as management buyouts, workforce reductions and sales of some business units. These efforts have made the company more financially sound than it was prior to the IMF bailout of the Korean economy.

In advance of the upcoming annual shareholder's meeting, the company has demonstrated that it has continued to transform and develop. Inadequate aspects of management reform efforts have been pointed out and steps are being taken in such areas as protection of shareholder interests and more transparent operation. Corporate competitiveness is expected to be enhanced even more as a result.

Samsung Electronics' top priority this year is to greatly strengthen the rights of shareholders, particularly those of the minority shareholders. The internal organization as well as company resources will be focused on respecting shareholders, putting shareholders first and protecting shareholders' interests.

Moreover, all of the major decision making bodies within the company-the Management Committee, Board of Directors, Technology Committee, Marketing Committee, and Labor-Management Committee-all understand that priority is to be put on shareholders. They all aim to do their part to improve the internal corporate culture so that this priority is realized.

Samsung Electronics' declaration of open-style management and deference to small investors will serve to enhance the credibility of all Korean enterprises. It is expected to inspire confidence in Korea and help induce foreign investment in that country.

The ratification of the amendments to the Articles of Incorporation at the 30th annual shareholders' meeting will result in greater operational transparency. In the future, Samsung Electronics plans to hold special briefings for domestic and foreign investors (part of investor relations activities) as well as to offer a wide range of public relations announcements on the changes taking place within the company. Special care will be taken to manage share prices and to ensure customer satisfaction.

Samsung Electronics Co., Ltd., recording 1998 sales revenue of more than 17 billion dollars (US), is a world leader in the electronics industry, with operations in more than 50 countries and 60,000 employees worldwide.
The company consists of three main business units: Multimedia & Home Appliances, Semiconductors and Information & Telecommunications. For more information, please visit this website,

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