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Samsung to reform governance structure
November 29, 2016, 10:45 am

Stakeholders have been pressuring the South Korean tech conglomerate to reform its governance structure in the wake of a corruption scandal and recalls of its flagship smart phone [Xinhua]

Stakeholders have been pressuring the South Korean tech conglomerate to reform its governance structure in the wake of a corruption scandal and recalls of its flagship smart phone [Xinhua]


South Korean tech giant Samsung Electronics said on Tuesday that it will boost shareholder returns by up to 30 per cent and undertake a reform of its corporate structure in a bid to overcome a significat drop in earnings due to product recalls in recent months.

Markets had anticipated that the company could be on the verge of dividing into two companies.

Following a string of financial losses mostly associated with the Samsung 7 cell phone recall and alleged connections to the scandal plaguing the South Korean government, shareholders have been pressuring the conglomerate to reform its governance structure and/or split into a holding company, and an operating company.

A split could potentially increase shareholder profits.

The pledge to review and reform its governance comes two weeks after Samsung Electronics agreed to buy the American Harman International Industries for $8 billion, in what is the biggest overseas acquisition on record by a South Korean firm.

Samsung is trying to break into the automotive electronics market, after the explosive Galaxy Note 7 recall and the subsequent costly slow down in growth in the smartphone division.

“We have been studying the automotive market for some time. We conclude that organic growth will not get us where we want to go fast enough,” Young Sohn, President and Chief Strategy Officer of Samsung Electronics, told Reuters in a conference call.

He, however, stressed that Samsung will not be getting into the car manufacturing business.

Harman shares rose 25.6 per cent to their highest level in more than one year after the acquisition was announced.

The BRICS Post with inputs from Agencies

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