Samsung Electronics Shareholders to Stage Counter-Rally Over 3% Dividend Payout

Shareholder group files rally notice near Samsung headquarters

Move counters union protest demanding treasury stock

A shareholder group plans to rally outside Samsung Electronics Co.'s Seocho headquarters in Seoul on the same day a union protest is scheduled. The clash over performance bonuses tied to the company's operating profit is spilling into the open, with the union and shareholders set to press separate demands.

A rally notice filed with Seoul's Seocho Police Station on Aug. 12 shows that the Korea Shareholder Activism Headquarters plans to hold an event titled "Korea Shareholder Activism Headquarters: Restoring Samsung Electronics Shareholder Rights" near Exit 8 of Gangnam Station from 10 a.m. to 10 p.m. on Aug. 21. The filing listed 100 participants and was accepted the same day.

The group plans what it described as a counter-rally after Samsung Electronics Labor Union Donghaeng, made up of employees in Samsung's Device eXperience, or DX, division, announced its own protest outside the Seocho office that day. Donghaeng is expected to demand 1,000 treasury shares for each DX employee. The shareholder group argues that bonuses linked to operating profit amount to a decision on profit distribution and therefore fall under the authority of shareholders at a general meeting.

At the center of the dispute is how Samsung Electronics' operating profit and bonus payments should be classified. The shareholder group says paying a fixed portion of operating profit as bonuses is not wages but an appropriation of earnings. It contends that profit-linked bonuses paid without shareholder approval are unlawful.

The group is challenging an agreement under which Samsung Electronics pays 10.5% of operating profit as bonuses. It estimates this year's total payout at about $28.9 billion and says the structure lets that money leave before distributable profit is calculated. On July 22, it also filed a criminal complaint against Samsung Electronics' chief executives on breach-of-trust charges. The group is scheduled to appear for complainant questioning at the Gyeonggi Nambu Provincial Police Agency on Aug. 19.

It also criticized Samsung Electronics' shareholder returns. The group said first- and second-quarter dividends totaled just 748 won a share for the first half. It put the total dividend payout at about $3.54 billion, or 3% of first-half operating profit of about $120.0 billion.

The shareholder group also took issue with treasury shares Samsung Electronics acquired for employee compensation. Samsung bought back shares worth a total of $9.58 billion in three rounds on Jan. 7, Jan. 29 and March 18. The group argues that buybacks not intended for cancellation do not amount to meaningful shareholder returns.

The group also called for a public report on the government's semiconductor investment push. It said a 15-year investment plan spanning Samsung and SK Group, worth about $3.44 trillion, effectively predetermines how future corporate earnings will be used over an extended period.

It said Samsung Electronics should disclose the conditions attached to the investment plan, how it plans to recover the investment, the extent of any dividend cuts, and procedures for revising or suspending the plan. The group also used the phrase "investment collusion," arguing that the plan was finalized without being reported to or approved by shareholders.

The shareholder group said it does not oppose lower employee compensation or semiconductor investment itself. "What we dispute is never the amount, but where decision-making authority lies," it said.

Kim Dae-young, Hankyung.com reporter kdy@hankyung.com