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Samsung Rejects Share Cancellation Dodge Claim
Samsung Electronics Responds to Employee Criticism of New Stock Compensation Plan
Samsung Electronics is addressing concerns raised by some employees regarding its newly introduced Performance-Linked Stock Compensation (PSU) system. The company is actively working to dispel claims, largely originating from labor unions, suggesting the system is a maneuver to circumvent the cancellation of its own shares.
◇ Samsung Electronics: "PSU Not Designed to Avoid Share Cancellation"
On the 16th, Samsung Electronics issued an internal communication to its employees, explicitly stating that "rumors suggesting the PSU system was implemented as a means to evade the obligation to cancel its own shares, as stipulated by the revised Commercial Act, are untrue." This statement aims to directly counter the growing skepticism surrounding the program.
The controversy arose following the announcement of the PSU system on the 14th. This system promises employees a variable number of company shares, ranging from 0 to 600 per person, to be awarded three years in the future. The actual number of shares distributed will depend on the company's stock price performance over that period. The distribution is structured as follows:
- Less than 20% Stock Price Increase: No shares are awarded.
- 40% to 60% Stock Price Increase: Employees receive 200–300 shares, depending on their position within the company.
- Over 100% Stock Price Increase: Employees receive double the amount, ranging from 400 to 600 shares.
This PSU system is presented as a one-time additional reward, separate from the company's existing performance-based bonus structure.
In response to the announcement, the Samsung Group Early Enterprise Union released a statement on the 15th, expressing concerns that "this system was planned as a means to avoid the 'mandatory cancellation of treasury shares' currently under discussion in the National Assembly, proposed by the Democratic Party." The Union's concern stems from the fact that proposed legislation regarding mandatory share cancellation includes an exception allowing companies to retain shares for "employee compensation purposes." The Union is wary that the PSU is a way for Samsung to exploit this exception.
It is important to note that Samsung Electronics has been actively purchasing its own shares, amounting to a total of 10 trillion Korean won between last November and this September. Of this total, 3 trillion Korean won worth of shares has already been cancelled. The remaining 7 trillion Korean won worth of shares are currently held by the company as treasury stock. In previous public filings, Samsung disclosed plans to utilize 5.4 trillion Korean won of this amount to enhance shareholder value and 1.6 trillion Korean won for employee compensation initiatives.
The Union's argument centers on the potential financial implications of the PSU system. If the stock price were to double within the three-year timeframe, the total share compensation could exceed the initially allocated 1.6 trillion Korean won and potentially approach 10 trillion Korean won. Conversely, if the stock price increase remains below 20%, the share compensation would be zero. The union contends that by establishing a "conditional agreement for three years later" with a variable payout contingent on specific conditions, Samsung is effectively attempting to avoid the mandatory share cancellation requirements.
◇ Samsung Electronics: PSU Shares to Be Purchased Separately
In its internal notice, Samsung Electronics directly addressed these concerns by clarifying the intended use and timing of its current treasury shares. The company stated that "the 5.4 trillion Korean won worth of treasury shares will be cancelled at an appropriate time," and "the 1.6 trillion Korean won allocated for employee compensation will be fully utilized by 2027."
Furthermore, the company explicitly stated that the shares to be distributed under the PSU program in 2028 will be secured through future, additional purchases, rather than utilizing the currently held treasury shares. This is a key point in their defense, as it separates the PSU from the existing pool of shares that might be subject to cancellation requirements.
A representative from Samsung Electronics emphasized that "The PSU system was conceived two to three years ago as a measure to link future performance with employee compensation, independent of discussions on mandatory share cancellation." This suggests that the PSU program was in development long before the current debate surrounding share cancellation began.
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