Samsung Electronics and Samsung Life deserve a failing grade 'F' for their value-up initiatives
Welcoming MP Kim Hyun-jung’s likely legislation which requires all independent directors elected annually for a one‑year term
- Korea Exchange and FSC are also to blame for temporarily permitting 'simplified' value-up disclosures
- Without restoring shareholder trust, Samsung Electronics stock may fall below P/B multiple of 1x in the next semi downturn
- Board quality of major Korean firms has regressed; Samsung Electronics BoD has yet to see non-Korean member
- Controlling shareholders’ control of the board has further tightened
- Strongly support 'one-year term' bill for independent directors to be proposed by MP Kim Hyun-Jung; in the U.S., annual re-election is norm for 91% of S&P500 firms, ensuring directors remain accountable
Both Samsung Electronics and Samsung Life Insurance released their respective value-up plans on March 19th. The announcements were driven by the objective to qualify as a 'high-dividend stock' for dividebd tax benefits. Despite the significance, Samsung Electronics' disclosure spanned only about 20 lines, and Samsung Life’s was just 10 lines. Even as a 'simplified’ version of disclosure, in our view, this was woefully inadequate, considering Samsung Electronics’ global standing and the high expectations of shareholders who have waited two years for a meaningful value-up roadmap.
Earnings and corporate governance are two distinct matters. The Forum assigns a failing grade 'F' to the value-up plans of both Samsung Electronics and Samsung Life Insurance. In previous evaluations of such plans in 2024~25, LG Electronics also received an 'F', while LG Chem and SK Inc. were graded 'D'. In stark contrast, financial industry leaders like KB Financial and Merits Financial earned an 'A+', followed by Shinhan Financial and SK Square with an 'A0', and Hyundai Motor with an 'A-'.
Demanding a legitimate value-up roadmap should be a fundamental requirement. Yet, the authorities' decision to allow short version filings - simply to reduce the requirements for tax-incentivized firms - is baffling and risks stalling the momentum of CG reform. It is particularly troubling that the guidelines treat board oversight as optional rather than obligatory. We firmly oppose this view; a value-up plan without the fiduciary accountability of the board is nothing more than a superficial action with no real substance.
The essence of the 'value-up' initiative lies in three pillars:
- Board-led leadership in strategic oversight;
- A rigorous awareness of the cost of capital and capital efficiency; and
- Rational and transparent capital allocation executed from the perspective of total shareholder interests.
The essence of 'value-up' is a board that actively guides and monitors management’s commitment to shareholder value. However, the very brief and insufficient plans from Samsung Electronics and Samsung Life completely lack these three essential elements. While Samsung Electronics is projected to generate nearly W200 trillion in operating profit each in 2026 and 2027 - driven by an industry upcycle and technological edge - good governance that prioritizes shareholder rights is an entirely different matter. Only when long-term growth potential is coupled with robust governance can a company earn the market's respect and a premium equity valuation.
Capital-intensive industries are inherently cyclical and highly sensitive to economic ups and downs. If Samsung Electronics fails to seize this opportunity to reinvent itself as a company that earns genuine shareholder trust, its stock price risks falling back below a P/B multiple of 1x during the next memory downcycle.
Shareholders rightfully expected Samsung Electronics to unveil a robust capital allocation framework to manage its massive W100 trillion annual FCF (estimate). Instead, the March 18th AGM and value-up disclosure on the next day offered no new vision. Management fell back on the same old script - reiterating the 2024–2026 policy of returning 50% of FCF. The vague promise of 'additional returns' from residual CF, contingent upon the 2026 regular dividend of W9.8 trillion, is simply a rehash of existing plans that fails to address the market's demand for a more friendly and transparent capital management strategy.
Samsung Electronics’ announcement of an W110 trillion investment budget for 2026 is nothing more than a rehash of existing market expectations. Analysts have long anticipated W70 trillion in capex and W40 trillion in R&D spending for this year. Crucially, R&D costs are already baked into the bottom line and, by extension, already accounted for in OCF and FCF. Presenting these routine operational expenses as part of a 'value-up' initiative shows a lack of genuine strategic depth regarding incremental shareholder value.
The downsizing of Samsung Electronics’ board to just eight from the previous nine members raises a critical concern: Can this smaller body genuinely honor the director’s duty (of loyalty to shareholders) to treat all shareholders fairly? Without a rigorous understanding of the cost of capital, any discussion on capital allocation lacks substance. We remain skeptical as to whether this board will move beyond its traditional role and actively safeguard the proportional interests of every shareholder, especially in the absence of more diverse, independent oversight.
Despite legal strides in investor protection, we believe board quality at major Korean corporates is regressing, a pattern clearly visible at Samsung Electronics. Capital markets in advanced countries prioritize the board's independence as well as expertise and experience of directors. Yet Samsung Electronics’ board remains dominated by academia. With three out of five independent directors being engineering professors, the board lacks the business experience and capital allocation knowledge required for high-level oversight; these professors would be more effective as external advisors. Aside from Director Kim Jun-sung, who was formerly CIO of Samsung Asset Management, there is a conspicuous lack of private-sector leadership among the independent directors. Furthermore, the arbitrary shortening of Director Hur Eun-nyeong’s term to two years highlights (via change in AoI) may have been motivated by its efforts to dilute the effects of cumulative voting from 3Q.
Once again, no foreigner was nominated for Samsung Electronics’ Board. Despite being a multinational giant with 90% of its revenue generated overseas, Samsung continues to exclude diverse voices from its boardroom: is this a lack of confidence or a refusal to evolve? In contrast, leading firms in Japan and Taiwan actively recruit foreign directors with multinational executive experience to ensure superior independence and expertise. It appears that Korean chaebols still insist on 100% board control. If anything, this proxy season suggests that the controlling shareholders' desire to dominate the board has only intensified.
The Forum strongly welcomes MP Kim Hyun-jung’s likely legislative initiative for one-year term for independent directors, as shared during his March 20th appearance on local media. This proxy season revealed a troubling trend: many listed companies, including Samsung Electronics, proposed agenda items to adjust board sizes and director tenure - a clear tactical maneuver to neutralize the cumulative voting system set for implementation this September.
This is a blatant disregard for both the National Assembly and shareholders. In contrast, global blue chips like Apple, NVIDIA, Alphabet, Microsoft, Meta, Amazon, and JP Morgan require their directors to face shareholder judgment annually at the AGM. Japan’s industry leaders - Sony, Hitachi, and Toyota - follow suit. According to the Harvard Law School Forum on Corporate Governance, as of 2015, 91% of S&P 500 companies have adopted one-year director terms to ensure regular accountability. When combined with the newly mandated immediate disclosure of voting results for each agenda item, this 'one-year director term' bill will effectively enhance transparency and elevate the qualitative standards of corporate boards.
April 3rd, 2026
Korean Corporate Governance Forum
Chairman, Namuh Rhee
Samsung Electronics and Samsung Life deserve a failing grade 'F' for their value-up initiatives
Welcoming MP Kim Hyun-jung’s likely legislation which requires all independent directors elected annually for a one‑year term
Both Samsung Electronics and Samsung Life Insurance released their respective value-up plans on March 19th. The announcements were driven by the objective to qualify as a 'high-dividend stock' for dividebd tax benefits. Despite the significance, Samsung Electronics' disclosure spanned only about 20 lines, and Samsung Life’s was just 10 lines. Even as a 'simplified’ version of disclosure, in our view, this was woefully inadequate, considering Samsung Electronics’ global standing and the high expectations of shareholders who have waited two years for a meaningful value-up roadmap.
Earnings and corporate governance are two distinct matters. The Forum assigns a failing grade 'F' to the value-up plans of both Samsung Electronics and Samsung Life Insurance. In previous evaluations of such plans in 2024~25, LG Electronics also received an 'F', while LG Chem and SK Inc. were graded 'D'. In stark contrast, financial industry leaders like KB Financial and Merits Financial earned an 'A+', followed by Shinhan Financial and SK Square with an 'A0', and Hyundai Motor with an 'A-'.
Demanding a legitimate value-up roadmap should be a fundamental requirement. Yet, the authorities' decision to allow short version filings - simply to reduce the requirements for tax-incentivized firms - is baffling and risks stalling the momentum of CG reform. It is particularly troubling that the guidelines treat board oversight as optional rather than obligatory. We firmly oppose this view; a value-up plan without the fiduciary accountability of the board is nothing more than a superficial action with no real substance.
The essence of the 'value-up' initiative lies in three pillars:
The essence of 'value-up' is a board that actively guides and monitors management’s commitment to shareholder value. However, the very brief and insufficient plans from Samsung Electronics and Samsung Life completely lack these three essential elements. While Samsung Electronics is projected to generate nearly W200 trillion in operating profit each in 2026 and 2027 - driven by an industry upcycle and technological edge - good governance that prioritizes shareholder rights is an entirely different matter. Only when long-term growth potential is coupled with robust governance can a company earn the market's respect and a premium equity valuation.
Capital-intensive industries are inherently cyclical and highly sensitive to economic ups and downs. If Samsung Electronics fails to seize this opportunity to reinvent itself as a company that earns genuine shareholder trust, its stock price risks falling back below a P/B multiple of 1x during the next memory downcycle.
Shareholders rightfully expected Samsung Electronics to unveil a robust capital allocation framework to manage its massive W100 trillion annual FCF (estimate). Instead, the March 18th AGM and value-up disclosure on the next day offered no new vision. Management fell back on the same old script - reiterating the 2024–2026 policy of returning 50% of FCF. The vague promise of 'additional returns' from residual CF, contingent upon the 2026 regular dividend of W9.8 trillion, is simply a rehash of existing plans that fails to address the market's demand for a more friendly and transparent capital management strategy.
Samsung Electronics’ announcement of an W110 trillion investment budget for 2026 is nothing more than a rehash of existing market expectations. Analysts have long anticipated W70 trillion in capex and W40 trillion in R&D spending for this year. Crucially, R&D costs are already baked into the bottom line and, by extension, already accounted for in OCF and FCF. Presenting these routine operational expenses as part of a 'value-up' initiative shows a lack of genuine strategic depth regarding incremental shareholder value.
The downsizing of Samsung Electronics’ board to just eight from the previous nine members raises a critical concern: Can this smaller body genuinely honor the director’s duty (of loyalty to shareholders) to treat all shareholders fairly? Without a rigorous understanding of the cost of capital, any discussion on capital allocation lacks substance. We remain skeptical as to whether this board will move beyond its traditional role and actively safeguard the proportional interests of every shareholder, especially in the absence of more diverse, independent oversight.
Despite legal strides in investor protection, we believe board quality at major Korean corporates is regressing, a pattern clearly visible at Samsung Electronics. Capital markets in advanced countries prioritize the board's independence as well as expertise and experience of directors. Yet Samsung Electronics’ board remains dominated by academia. With three out of five independent directors being engineering professors, the board lacks the business experience and capital allocation knowledge required for high-level oversight; these professors would be more effective as external advisors. Aside from Director Kim Jun-sung, who was formerly CIO of Samsung Asset Management, there is a conspicuous lack of private-sector leadership among the independent directors. Furthermore, the arbitrary shortening of Director Hur Eun-nyeong’s term to two years highlights (via change in AoI) may have been motivated by its efforts to dilute the effects of cumulative voting from 3Q.
Once again, no foreigner was nominated for Samsung Electronics’ Board. Despite being a multinational giant with 90% of its revenue generated overseas, Samsung continues to exclude diverse voices from its boardroom: is this a lack of confidence or a refusal to evolve? In contrast, leading firms in Japan and Taiwan actively recruit foreign directors with multinational executive experience to ensure superior independence and expertise. It appears that Korean chaebols still insist on 100% board control. If anything, this proxy season suggests that the controlling shareholders' desire to dominate the board has only intensified.
The Forum strongly welcomes MP Kim Hyun-jung’s likely legislative initiative for one-year term for independent directors, as shared during his March 20th appearance on local media. This proxy season revealed a troubling trend: many listed companies, including Samsung Electronics, proposed agenda items to adjust board sizes and director tenure - a clear tactical maneuver to neutralize the cumulative voting system set for implementation this September.
This is a blatant disregard for both the National Assembly and shareholders. In contrast, global blue chips like Apple, NVIDIA, Alphabet, Microsoft, Meta, Amazon, and JP Morgan require their directors to face shareholder judgment annually at the AGM. Japan’s industry leaders - Sony, Hitachi, and Toyota - follow suit. According to the Harvard Law School Forum on Corporate Governance, as of 2015, 91% of S&P 500 companies have adopted one-year director terms to ensure regular accountability. When combined with the newly mandated immediate disclosure of voting results for each agenda item, this 'one-year director term' bill will effectively enhance transparency and elevate the qualitative standards of corporate boards.
April 3rd, 2026
Korean Corporate Governance Forum
Chairman, Namuh Rhee