Shareholder Group Challenges Samsung, SK hynix Performance Pay
Samsung Electronics and SK hynix are facing legal challenges from a shareholder advocacy group over performance-based bonuses paid under labor-management agreements, with the group alleging that the arrangements violate shareholder rights and constitute a breach of fiduciary duty.The Korea Sharehold
A shareholder advocacy group is contesting Samsung Electronics and SK hynix over performance-based bonuses paid under labor-management agreements, alleging the practice contravenes shareholder rights and breaches fiduciary duty. The Korea Shareholder Movement Headquarters presented a 30-page legal opinion to the Gyeonggi Nambu Provincial Police Agency on August 19, charging Samsung Electronics' and SK hynix's CEOs with breach of trust under the Act on the Aggravated Punishment of Specific Economic Crimes.
The group contends that the allocation of 10.5% of pretax operating profit for Samsung Electronics and 10% for SK hynix as performance compensation lacks a valid legal basis, as argued in a recent Supreme Court ruling.
The group's claim is that bonuses tied to profits are a "subsequent distribution of management performance," requiring shareholder approval under the Commercial Act. Min Kyung-kwon, head of the Korea Shareholder Movement Headquarters, clarified that the group is not against performance-based compensation per se, but objects to "the disposal of company assets without the owners' consent." They insist that shareholders' interests must guide the determination and payment of performance bonuses.
In addition to halting bonus payments, the group is advocating for a robust shareholder-return policy, demanding that Samsung Electronics return over 170 trillion won (~$121.45 billion) to shareholders via dividends and share buybacks and cancellations. SK hynix is urged to return more than 100 trillion won through similar measures, with particular emphasis on halting discussions on performance bonuses and seeking shareholder approval before any distribution plan.
The group emphasizes the "duty of loyalty to all shareholders" introduced by recent Commercial Act amendments, arguing that directors must protect and treat all shareholders fairly, prioritizing shareholder interests in major semiconductor investments and share-buyback policies. The Korea Shareholder Movement Headquarters indicated it would intensify its response if demands are not met, potentially escalating criminal complaints against all board members of both companies.
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