Samsung Electronics' bonus issue is not just about money
Skin in the game! Long-term alignment is needed where all employees become shareholders
Samsung must announce simple and transparent performance evaluation and compensation system
- Situation is result of archaic HR policies; incompetent board is also to blame
- Complex EVA based evaluation and compensation system, which even top executives do not fully understand, lacks transparency
- Introduce advanced compensation system desired by key engineers; a stock-based long-term incentive program is necessary
- Company must solve this issue on its own without intervention from government or National Assembly
- Fundamental solution to its labor-labor conflict is spin off like Samsung Biologics
The incentive bonus issue at Samsung Electronics has caused turmoil in the country. Taiwanese people refer to TSMC as the "National Guardian Mountain," meaning a "sacred mountain that protects the nation." For Koreans, especially the older generations, Samsung holds special significance. The local media relentlessly publishes sensational articles with titles like "Extreme Greed," "Closed Benefit Cartel," and "Export Shock."
It is a time that requires balance, in our view. The compensation issue at Samsung Electronics is intricately entangled with CG problems. While it is a matter of money, it is not solely about money. Compensation and capital allocation are core responsibilities of the board of directors and senior management. Samsung Electronics has not been able handle its own "company issues," leading to public discourse and being dragged along by various stakeholders. Are they ultimately waiting for the government's decision? The company must resolve this on its own. The quality of management is a key element of equity evaluation. If Samsung Electronics voluntarily resolves this situation, it could serve as a representative case for alleviating the "Korea discount."
Let’s have skin in the game. This means "take responsibility and directly participate in the reality (issues)." The core of capitalism is aligning the incentives of various stakeholders. One of the main duties of management and the board is to design and implement these incentives effectively. Society should not incentivize loud groups. Incentives should be given to those who take risks. The performance bonus situation at Samsung Electronics can only be resolved through the institutionalization of stock-based compensation. Chairman JY Lee and the management must take direct action to restore the trust of employees, which has fallen to the ground.
Tesla engineers receive stock-based compensation upon joining. They must choose between RSUs and stock options. Key personnel in Silicon Valley receive stock compensation not only upon joining but also annually. Senior engineers with over ten years of experience in big tech receive more than half of their total compensation in RSUs. The aim is to align employees and shareholders. When long-serving employees of a continuously developing company like Samsung Electronics become shareholders through stock compensation, it is a win-win situation. There is a famous story about a mid-level manager at NVIDIA who, over 18 years, used the ESOP scheme to invest 10-15% of his base salary in company stock (automatically purchased at a 15% discount compared to market value), resulting in a stock value worth $62 million upon retirement.
If a comprehensive compensation plan centered on stock reward had been implemented last year, this situation could have been prevented, in our opinion. The Forum pointed out in an Opinion titled "Three actions for Samsung Electronics JY Lee and his team” that the management, which cannot keep pace with the times, and the board, which lacks professionalism and independence, is problematic. The third proposal stated that, "3. Implement a compensation system that aligns the interests of employees, shareholders, and the board. Given the high global demand for Samsung’s key talent, it is crucial to adopt a competitive compensation package. Immediate implementation of a stock-based compensation plan, such as RSUs is recommended to retain top-tier talents.” However, the company has only accepted a small part of this.
The management of Samsung Electronics needs self-reflection. This situation seems to have arisen due to a lack of trust from employees in the management. The Business Support Office (former Chairman’s Office) of Samsung Electronics, which plays the role of a Group control tower, is following the old Group secretarial organization that operated with personnel, finance, and auditing as the three main pillars in the 1980s and 1990s. We wonder how much the Business Support Office has listened to and reflected the desires of young engineers, researchers, developers, manufacturing personnel, and those in charge of facilities, processes, and quality for a rational and transparent performance evaluation and compensation system in the Silicon Valley style. Let’s clarify a few facts regarding compensation:
It is inappropriate to determine compensation in advance (e.g., 15% of OP). However, applying a cap to performance bonuses is also problematic;
NVIDIA explicitly states that it does not pre-determine the total compensation for each employee;
The final authority on compensation lies with management. Compensation for key executives such as the CEO falls under the board's jurisdiction;
The complex EVA-based evaluation and compensation system, which is not even used by companies in developed countries and is poorly understood by Samsung’s top executives, lacks transparency; and
The total compensation of core IT personnel in Silicon Valley of $330,000 to $670,000 is not excessive.
Advanced companies have simple and transparent performance evaluation and compensation systems. Apple's executive evaluation and compensation focus on: 1) Relative total shareholder return; 2) Revenue growth; and Operating profit growth. NVIDIA similarly uses: 1) Three-year relative total shareholder return; 2) Revenue growth; and Operating profit growth.
Let’s urgently resolve the accumulated issues on compensation. Immediately abolish the EVA-based evaluation and compensation known only to the Business Support Office and Management Support Staff (reporting to CFA). We need a simple evaluation and compensation system that all stakeholders, including management, the board, employees, and shareholders, can easily understand and measure.
In Korea, it is urgent to include related information in the proxy statement to ensure transparent review and approval of compensation, as well as to obtain AGM approval. All advanced companies like Apple, NVIDIA, and Alphabet disclose their "peer group" lists that they compete with to attract talent, in the Compensation Committee under the Board. Apple has 19 companies, and NVIDIA has 13 companies classified as "peers" (see table below). Samsung Electronics should also announce a "peer" list that includes SK Hynix, Micron Technology, Intel, and TSMC etc, and manage key talent through transparent and appropriate compensation.
NVIDIA Peer List (Source: NVIDIA proxy statement)
Apple Peer List (Source: Apple proxy statement)
The labor-labor conflict is partly a result of the company's own actions. The issue begins with housing various business units, such as semiconductors, smartphones, and home appliances etc, under one roof at Samsung Electronics, despite their vastly different industrial characteristics (growth potential, profitability, capital intensity, etc.). There is a significant conflict of interest between Samsung's semiconductor (DS) and smartphone (DX) divisions. While controlling shareholders prioritize control, general shareholders find it difficult to accept a complex business structure that leads to equity valuation discounts.
Fundamentally, the way to enhance Samsung Electronics' corporate value is to spin off these distinct business divisions so that each can pursue its own growth path. Samsung Electronics is like an aircraft carrier with total assets exceeding W560 trillion. For this aircraft carrier, which operates various businesses with different industry cycles - semiconductors, smartphones, home appliances, displays etc - to navigate at full speed, strong leadership, resolution of conflicts of interest, and alignment are essential.
The most ideal scenario would be to spin off Samsung Electronics into three holding companies: 1) Semiconductors, 2) Foundry, and 3) Consumer, similar to the equity spin off of Samsung Biologics. A 'Samsung Semiconductor Holdings' would be established to incorporate all semiconductor divisions except for foundry operations, while a 'Foundry Holdings' would include only the foundry business, which would be listed simultaneously in Korea and the U.S. Additionally, a 'Samsung Consumer Holdings' would be established to incorporate the DX division and Harman. This restructuring is necessary to overcome the contradictions of the ownership structure that prevents proper business opportunities due to concerns over conflicts of interest, allowing the foundry to become self-sufficient. Foundry Holdings should appoint an independent management team and promise significant equity compensation as an incentive.
Chairman Lee should manage Samsung Consumer Holdings directly, while Samsung Semiconductor Holdings and Foundry Holdings should be upgraded to a fully professional management system, with the chairman playing a passive role on the board. If necessary, considering the recruitment of a foreign CEO could also be worthwhile.
May 5th, 2026
Korean Corporate Governance Forum
Chairman, Namuh Rhee
Samsung Electronics' bonus issue is not just about money
Skin in the game! Long-term alignment is needed where all employees become shareholders
Samsung must announce simple and transparent performance evaluation and compensation system
The incentive bonus issue at Samsung Electronics has caused turmoil in the country. Taiwanese people refer to TSMC as the "National Guardian Mountain," meaning a "sacred mountain that protects the nation." For Koreans, especially the older generations, Samsung holds special significance. The local media relentlessly publishes sensational articles with titles like "Extreme Greed," "Closed Benefit Cartel," and "Export Shock."
It is a time that requires balance, in our view. The compensation issue at Samsung Electronics is intricately entangled with CG problems. While it is a matter of money, it is not solely about money. Compensation and capital allocation are core responsibilities of the board of directors and senior management. Samsung Electronics has not been able handle its own "company issues," leading to public discourse and being dragged along by various stakeholders. Are they ultimately waiting for the government's decision? The company must resolve this on its own. The quality of management is a key element of equity evaluation. If Samsung Electronics voluntarily resolves this situation, it could serve as a representative case for alleviating the "Korea discount."
Let’s have skin in the game. This means "take responsibility and directly participate in the reality (issues)." The core of capitalism is aligning the incentives of various stakeholders. One of the main duties of management and the board is to design and implement these incentives effectively. Society should not incentivize loud groups. Incentives should be given to those who take risks. The performance bonus situation at Samsung Electronics can only be resolved through the institutionalization of stock-based compensation. Chairman JY Lee and the management must take direct action to restore the trust of employees, which has fallen to the ground.
Tesla engineers receive stock-based compensation upon joining. They must choose between RSUs and stock options. Key personnel in Silicon Valley receive stock compensation not only upon joining but also annually. Senior engineers with over ten years of experience in big tech receive more than half of their total compensation in RSUs. The aim is to align employees and shareholders. When long-serving employees of a continuously developing company like Samsung Electronics become shareholders through stock compensation, it is a win-win situation. There is a famous story about a mid-level manager at NVIDIA who, over 18 years, used the ESOP scheme to invest 10-15% of his base salary in company stock (automatically purchased at a 15% discount compared to market value), resulting in a stock value worth $62 million upon retirement.
If a comprehensive compensation plan centered on stock reward had been implemented last year, this situation could have been prevented, in our opinion. The Forum pointed out in an Opinion titled "Three actions for Samsung Electronics JY Lee and his team” that the management, which cannot keep pace with the times, and the board, which lacks professionalism and independence, is problematic. The third proposal stated that, "3. Implement a compensation system that aligns the interests of employees, shareholders, and the board. Given the high global demand for Samsung’s key talent, it is crucial to adopt a competitive compensation package. Immediate implementation of a stock-based compensation plan, such as RSUs is recommended to retain top-tier talents.” However, the company has only accepted a small part of this.
The management of Samsung Electronics needs self-reflection. This situation seems to have arisen due to a lack of trust from employees in the management. The Business Support Office (former Chairman’s Office) of Samsung Electronics, which plays the role of a Group control tower, is following the old Group secretarial organization that operated with personnel, finance, and auditing as the three main pillars in the 1980s and 1990s. We wonder how much the Business Support Office has listened to and reflected the desires of young engineers, researchers, developers, manufacturing personnel, and those in charge of facilities, processes, and quality for a rational and transparent performance evaluation and compensation system in the Silicon Valley style. Let’s clarify a few facts regarding compensation:
It is inappropriate to determine compensation in advance (e.g., 15% of OP). However, applying a cap to performance bonuses is also problematic;
NVIDIA explicitly states that it does not pre-determine the total compensation for each employee;
The final authority on compensation lies with management. Compensation for key executives such as the CEO falls under the board's jurisdiction;
The complex EVA-based evaluation and compensation system, which is not even used by companies in developed countries and is poorly understood by Samsung’s top executives, lacks transparency; and
The total compensation of core IT personnel in Silicon Valley of $330,000 to $670,000 is not excessive.
Advanced companies have simple and transparent performance evaluation and compensation systems. Apple's executive evaluation and compensation focus on: 1) Relative total shareholder return; 2) Revenue growth; and Operating profit growth. NVIDIA similarly uses: 1) Three-year relative total shareholder return; 2) Revenue growth; and Operating profit growth.
Let’s urgently resolve the accumulated issues on compensation. Immediately abolish the EVA-based evaluation and compensation known only to the Business Support Office and Management Support Staff (reporting to CFA). We need a simple evaluation and compensation system that all stakeholders, including management, the board, employees, and shareholders, can easily understand and measure.
In Korea, it is urgent to include related information in the proxy statement to ensure transparent review and approval of compensation, as well as to obtain AGM approval. All advanced companies like Apple, NVIDIA, and Alphabet disclose their "peer group" lists that they compete with to attract talent, in the Compensation Committee under the Board. Apple has 19 companies, and NVIDIA has 13 companies classified as "peers" (see table below). Samsung Electronics should also announce a "peer" list that includes SK Hynix, Micron Technology, Intel, and TSMC etc, and manage key talent through transparent and appropriate compensation.
NVIDIA Peer List (Source: NVIDIA proxy statement)
Apple Peer List (Source: Apple proxy statement)
The labor-labor conflict is partly a result of the company's own actions. The issue begins with housing various business units, such as semiconductors, smartphones, and home appliances etc, under one roof at Samsung Electronics, despite their vastly different industrial characteristics (growth potential, profitability, capital intensity, etc.). There is a significant conflict of interest between Samsung's semiconductor (DS) and smartphone (DX) divisions. While controlling shareholders prioritize control, general shareholders find it difficult to accept a complex business structure that leads to equity valuation discounts.
Fundamentally, the way to enhance Samsung Electronics' corporate value is to spin off these distinct business divisions so that each can pursue its own growth path. Samsung Electronics is like an aircraft carrier with total assets exceeding W560 trillion. For this aircraft carrier, which operates various businesses with different industry cycles - semiconductors, smartphones, home appliances, displays etc - to navigate at full speed, strong leadership, resolution of conflicts of interest, and alignment are essential.
The most ideal scenario would be to spin off Samsung Electronics into three holding companies: 1) Semiconductors, 2) Foundry, and 3) Consumer, similar to the equity spin off of Samsung Biologics. A 'Samsung Semiconductor Holdings' would be established to incorporate all semiconductor divisions except for foundry operations, while a 'Foundry Holdings' would include only the foundry business, which would be listed simultaneously in Korea and the U.S. Additionally, a 'Samsung Consumer Holdings' would be established to incorporate the DX division and Harman. This restructuring is necessary to overcome the contradictions of the ownership structure that prevents proper business opportunities due to concerns over conflicts of interest, allowing the foundry to become self-sufficient. Foundry Holdings should appoint an independent management team and promise significant equity compensation as an incentive.
Chairman Lee should manage Samsung Consumer Holdings directly, while Samsung Semiconductor Holdings and Foundry Holdings should be upgraded to a fully professional management system, with the chairman playing a passive role on the board. If necessary, considering the recruitment of a foreign CEO could also be worthwhile.
May 5th, 2026
Korean Corporate Governance Forum
Chairman, Namuh Rhee