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Samsung suspends reform of its governance structure

Posted March. 25, 2017 07:11,   

Updated March. 25, 2017 07:17


Samsung Electronics has decided to temporarily suspend its plan to reform corporate governance structure. Samsung has reviewed many options to reform its governance structure including switching to a holding company since last year. It seems that the company’s decision is due to all the pressure of the arrest of Vice Chairman Lee Jae-yong and a revised bill of the Commercial Act, which is recently introduced to the National Assembly and includes unfavorable provisions on Samsung’s efforts to reform its governance structure.

“The company will share the result to stockholders after reviewing many aspects (relating to the switch to a holding company) such as legal and tax issues,” Samsung Electronics Vice Chairman Kwon Oh-Hyun said In the general meeting of shareholders held at the multipurpose hall of Samsung’s Seocho Headquarters in Seoul on Friday. “So far, however, implementing reform now is unlikely as multiple negative effects of conversion to a holding company are found during the review.”

In last November, Samsung said the company was considering converting itself a holding company in a neutral stance and it would take at least six months to review practical issues. “There was great concern about making any changes on its corporate governance structure as such moves might cause misunderstanding of the public at the present time, considering that the head of company was arrested after misunderstanding over his succession,” a senior manager of Samsung said. It is said that Samsung is being cautious to make an announcement in front of shareholders due to concerns over the slump in stock of the affiliates of Samsung Construction & Trading Corporation (Samsung C&T) and others that are related to the corporate governance structure. Despite its effort, however, Friday’s stock price of Samsung C&T and Samsung SDS dropped by 7.27 percent and 8.47 percent, respectively.

Ji-Hyun Kim jhk85@donga.com