Samsung Electronics Retail Investors Challenge Bonus Plan They Say Could Reach $28.9 Billion a Year

Samsung Retail Shareholders Escalate Activism

'Tens of Trillions Can't Be Spent Without a Shareholder Vote'

Letter Urges National Pension Service to Act

Retail shareholders of Samsung Electronics plan to send a letter to the National Pension Service, South Korea's state pension fund, arguing that a proposed bonus plan for the semiconductor division should require shareholder approval at a general meeting. They estimate the payouts could reach as much as 40 trillion won ($28.9 billion) a year and are calling on the pension fund, one of Samsung's major shareholders, to respond.

ACT, a platform for retail shareholders, said on July 16 that it plans to gather signatures from Samsung Electronics investors and submit the letter to the National Pension Service's fund management arm on July 20. Electronic signatures will be accepted through July 19. The letter challenges the implementation of a tentative 2026 wage and bonus agreement reached between Samsung Electronics and its labor union without approval at a shareholder meeting.

The tentative agreement cited by ACT would create a special management performance bonus for the chip division that pays 10.5% of business performance with no cap for 10 years. Combined with existing incentives, the total bonus pool would amount to about 12% of business performance, by ACT's estimate. Applying that formula to this year's expected results, the group argues annual bonuses could reach as much as 40 trillion won, with payouts over 10 years running into the hundreds of trillions of won.

ACT said the National Pension Service should review how the payout structure affects shareholder value because it is both a major shareholder in Samsung Electronics and a fiduciary managing the public's retirement savings. In the letter, ACT plans to say that if the pension fund remains on the sidelines despite concerns about a massive outflow of national wealth and fails to fulfill its fiduciary duty, Samsung Electronics' 6 million retail shareholders will have no choice but to sharply criticize that neglect. So far, 424 shareholders have signed the letter. Together they own 207,724 Samsung Electronics shares.

ACT also argues that shareholders bear the risk of a falling stock price, while employees receive bonuses linked to operating profit regardless of the share price. It says that creates an asymmetric structure for risk sharing and profit distribution between shareholders and employees. The group also said that while the government is considering requiring board approval for bonus payments above a certain threshold, shareholder approval should be added as well. Director compensation caps worth several hundred million dollars also require shareholder approval, it said, so allowing tens of trillions of won in bonuses to be paid solely by board decision runs directly against the intent of the Commercial Act.

Lee Sang-mok, ACT's chief executive, said a profit distribution plan involving tens of trillions of won every year for a decade should be subject to strict approval by shareholders, who bear the risk as the company's true owners. The issue, he added, is whether the capital market will uphold the basic principle that employee compensation should also be decided transparently and lawfully at a shareholder meeting.

ACT is also pushing to convene an extraordinary shareholder meeting. A recent vote held on the platform showed 99.7% support. Once it secures the shareholder registry as of the end of the second quarter later this month, it plans to send mail to major shareholders asking them to take part in the extraordinary meeting.

Hong Min-seong, Hankyung.com reporter mshong@hankyung.com