Samsung Electronics is completely withdrawing its plan of changing itself into a holding company. It announced that it does not have any plans in the future of re-pushing for this plan and that it will completely get rid of cross-shareholding even it takes time. Samsung Electronics explained that it is withdrawing from this plan because it does not help with gaining competitive edge in businesses and there is a chance that it will give burdens to Samsung Electronics’ businesses. Fact that many cases of bills, which can have negative impact in this plan, are currently motioned to National Assembly is another reason why it has withdrawn from this plan.
Samsung Electronics held a board of governors meeting on the 27th and has decided not to change itself into a holding company. It clearly stated that it is not temporarily stopping this plan but it does not have any plans of changing itself into a holding company.
“We do not have any plans in the future of changing ourselves into a holding company.” said Samsung Electronics at a conference call regarding a question that asked Samsung Electronics on whether or not it will reexamine this plan in the future. “Although it might take some time because many subsidiaries need to take care of cross-shareholding, we are going to completely resolve cross-shareholding by looking for ways and timing that will minimize impact from markets.”
Discussion about changing Samsung Electronics into a holding company gained momentum when an American hedge fund management firm called Elliott Management suggested last year that Samsung Electronics should divide itself into an operating company and a holding company. “Because there are negative effects of changing Samsung Electronics into a holding company, it does not look that easy to implement this plan.” said Vice-President Kwon Oh-hyeon of Samsung Electronics at a periodic general meeting of shareholders that was held last month. At this board of governors meeting, he declared Samsung Electronics’ intention of withdrawing from its plan.
Samsung Electronics announced that even though Vice-Chairman Lee Jae-yong received such information as a right of registered member of board of directors, he did not give any special opinions. Financial industries think that goals of Vice-Chairman Lee were applied to withdrawal from this plan.
Samsung Electronics explained that it is withdrawing from this plan because there are no practical profits and too many risks. Changing Samsung Electronics into a holding company will not help much in strengthening businesses’ overall competitive edge but there are chances that it will bring burdens to businesses such as breakup of managements’ capabilities.
Samsung Electronics came to a conclusion that there would be many problems that are accompanied during a process of changing itself into a holding company. First of all although settlement of shares that are owned by Samsung Electronics and its subsidiaries are needed during this process, it will be difficult for Samsung Electronics to push for this plan alone since it would need agreement from boards of directors and shareholders from each subsidiary in order to settle shares that are owned by subsidiaries. According to financial industries’ laws regarding improvement of structure and insurance industries’ laws, because current financial subsidiaries might have to sell partial or entire Samsung Electronics’ shares that they own if Samsung Electronics divides into a holding company and an operating company, there is a chance that this could make Samsung Electronics’ stocks insecure.
Industries think that the fact that a revision of many cases of laws that can have negative impact on this plan had also worked as burdens for Samsung Electronics.
“Even if we decide to change ourselves into a holding company, it will not happen immediately but it will take about five months to a year after resolutions from a board of governors. Revision of laws always has risks that can be implemented anytime during this period.” said Samsung Electronics at a conference call. “On the other hand if we decide to change ourselves into a holding company, a process of establishment of revised bills that are currently motioned will be accelerated and impact our plan.”
It seems that Samsung Electronics will strengthen responsibility management of CEOs while maintaining of having a representative director for each business sector. Instead it is going to operate ‘Governance Committee’ that will be composed of five non-executive directors. This committee will be responsible for reviewing management matters that have significant impact on values of shareholders and strengthening communications with shareholders.
Staff Reporter Kwon, Keonho | wingh1@etnews.com