ICG Samsung
The client wants to recommend governance changes with special emphasis on the board of directors.
Evaluate the current board of Samsung Electronics. What are the strengths and weaknesses in the current board composition? How many directors can be classified as non-executive? How many can be classified as independent? What are your criteria's for assessing director independence? Do you think changes need to be made to the current board composition? If no - why not, if yes - what changes would you recommend?
The board of Samsung Electronics has 23 directors of which 7 are executive directors and 16 are nonexecutive directors. The total number of Samsung group directors including executive directors is 20.
Only 3 out of 23 directors are independent directors. The board also has 2 family directors (son and wife of Kun-Hee Lee).
Independence is generally defined as being non-management and free of any material relationship with the company or its management for three years. For instance, a former officer of a company will generally not be deemed an independent director if he or she was an officer of the same company in the most recent three years. Most stock exchanges and regulatory bodies in the developed countries require a majority of the board to be independent. All directors with family ties or professional subordinates are not independent. There should be no conflict of interest, so all executive directors are not independent. Sarbanes-Oxley Act in USA and Clause 49 of SEBI Act in India have very similar definitions and empirical evidence indicates that the majority of the directors of listed companies in these geographies are independent.
Strengths in the current board composition are following:
1. 7 executive directors – (30%) well versed with the company’s finance, strategies, management objectives, and have a solid understanding of the business.
2. Ability to take quick decisions.
3. Self-interest aligned with management interests and
Evaluate the current board of Samsung Electronics. What are the strengths and weaknesses in the current board composition? How many directors can be classified as non-executive? How many can be classified as independent? What are your criteria's for assessing director independence? Do you think changes need to be made to the current board composition? If no - why not, if yes - what changes would you recommend?
The board of Samsung Electronics has 23 directors of which 7 are executive directors and 16 are nonexecutive directors. The total number of Samsung group directors including executive directors is 20.
Only 3 out of 23 directors are independent directors. The board also has 2 family directors (son and wife of Kun-Hee Lee).
Independence is generally defined as being non-management and free of any material relationship with the company or its management for three years. For instance, a former officer of a company will generally not be deemed an independent director if he or she was an officer of the same company in the most recent three years. Most stock exchanges and regulatory bodies in the developed countries require a majority of the board to be independent. All directors with family ties or professional subordinates are not independent. There should be no conflict of interest, so all executive directors are not independent. Sarbanes-Oxley Act in USA and Clause 49 of SEBI Act in India have very similar definitions and empirical evidence indicates that the majority of the directors of listed companies in these geographies are independent.
Strengths in the current board composition are following:
1. 7 executive directors – (30%) well versed with the company’s finance, strategies, management objectives, and have a solid understanding of the business.
2. Ability to take quick decisions.
3. Self-interest aligned with management interests and