Professional Documents
Culture Documents
2. 3.
4.
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(unit: %) Controlling Shareholder & Related Parties 51.76 Shinsegae 11.07 Employee Shareholders 5.85 Domestic Shareholders 26.14 Foreign Shareholders 5.18
Board Composition The Board of Directors (BOD) of Samsung Life consists of nine directors (four internal directors and five outside directors) as of September 2010. Under the Insurance Business Act, outside directors should constitute the majority of the Companys BOD, and the number of directors should not exceed nine. The term of directors is three years, but the second term of reelected outside directors is only one year. An outside director may hold the directorship for five years in total. In addition, the Company has a staggered board, where one-fifth of the outside directors come up for election annually. As subcommittees under the BOD, the Company has established three mandatory committees (the Audit Committee, the Outside Director Nomination Committee and the Risk Management Committee) as well as three non-mandatory ones (the Related Party Transaction Committee, the Steering Committee and the Evaluation & Compensation Committee). Under the Insurance Business Act, the Company has set up the Audit Committee that consists of one internal director and two outside directors. One of the outside directors sits as the Chair.
Number of Internal Directors 4 Number of Outside Directors 5 Number of Audit Committee Members 1 internal director & 2 outside directors Number of Directors Seats Vacant on BOD 1
Major Provisions of Articles of Incorporation & Statutory Regulations The Articles of Incorporation (AOI) of Samsung Life stipulate that the Company may issue new shares to third parties for business purposes, but may not issue stock-related bonds (convertible bonds or bonds with warrants). The AOI allow proxy voting at the General Shareholders Meeting, but cumulative voting and voting-by-mail are not permitted. In addition, the Company may not pay interim dividend, but may cancel shares upon the BODs approval.
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Samsung Groups Affiliates Samsung Life is a financial affiliate of Samsung Group, which has been designated as a large business group by the Fair Trade Commission. As of October 2010, Samsung Group ranks the 1st among South Korean large business groups in terms of asset size, and has 67 affiliates in the business fields of electronics, construction, trade, heavy industry, insurance, securities, investment trust, chemicals, textiles, security services, hotel management, etc. Shareholder Return Samsung Life was not listed until 2009, and its dividend payout ratio had been below 10% until 2007. At the end of 2009, however, the Company raised its dividend by 562%, from 200 KRW to 1,125 KRW per share, immediately before it went public. Yet, it is doubtful whether the Company will maintain the same dividend payout ratio after the IPO.
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financial capacity. In sum, it is not easy for Samsung Life to adopt a holding company structure under current circumstances. In the end, Samsung Group will adopt a holding company structure only when Kun-Hee Lee and his family can reinforce their control of the Groups major affiliates, or when Samsung Life comes up with a solution for the problem of its shareholdings in Samsung Electronics. [Samsung Group]
Kun-Hee Lee Jae-Yong Lee
42.32 1.5
26.4 2.4
20.8
Samsung Life
Samsung Corp
5.1
10.4
Samsung F& M
20.4
Samsung SDI
7.4
S1 Samsung fine
11.0
11.5 Chemical 8.4 10.7 Samsung General 3.9 Chemical 7.42 5.1 17.6 23.7 50.0 17.2 21.7 14.1
Hotel Silla Samsung Heavy I market Korea
65.3 51.0
2.4 50.0
Samsung elctromechanics
40.86
Credu
13.1
4.3
Samsung Engineering
Cheil Worldwide
12.6
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Financial Supervision on Management Quality & Transparency Pursuant to the Insurance Business Act, Samsung Life is regulated by the Financial Supervisory Service (FSS) with regard to management quality and corporate governance. Ostensibly, transparency in management is higher in Samsung Life than in other listed companies, since its management and financial soundness are officially supervised. In 2007, however, the so-called Samsung slush fund scandal revealed that Samsung Lifes shares had been held in false-name accounts, and also that Samsungs controlling family had been involved in other irregular activities. Despite these facts, Samsung Life is still relatively free from sanctions or restrictions due to the Groups overwhelming influence.
[Restrictions under Insurance Business Act] Qualifications of Fit and proper test in terms of the financial soundness / Subject to approval Major Shareholders from the FSS Restriction on Insurers Concurrent Operation of Life Insurance Prohibition of concurrent operation of life insurance business and non-life Business, Non-Life insurance business / Prohibition of operation of non-insurance businesses Insurance Business and Non-Insurance Businesses Disqualification of officers: Persons who have been given criminal sanction Restriction on or discharged due to violation of financial laws; Persons who served at any Qualifications of financial institution whose license and permit were cancelled; Persons who Officers and held a responsible position at any troubled financial institution. Concurrent Holding of Officers of insurance companies shall not concurrently serve at other profitOther Offices making corporations. 1. An insurer shall be prohibited from performing directly or indirectly the act falling under each of the following subparagraphs with any of its large shareholders: 1)The act of extending any credit for the purpose of assisting any large shareholder in his equity investment in other company 2)The act of transferring any asset without compensation, or the act of selling or exchanging any asset or extending credit on terms greatly disadvantageous to the relevant insurance company in light of the conventional terms of transactions 2. In case of any transactions with its large shareholders falling under each Restriction on of the following subparagraphs, the insurer shall obtain the consent of all Transactions with Large directors on the Board. Shareholders * The act of extending any credit in excess of the lesser amount between 1/1,000 of its equity capital and KRW 1 billion * The act of acquiring bonds or shares issued by its large shareholders in excess of the lesser amount between 1/1,000 of its equity capital and KRW 1 3. Obligation to publicly disclose transactions with its large shareholders * The act of extending any credit in excess of the lesser amount between 1/1,000 of its equity capital and KRW 1 billion * The act of acquiring bonds or shares issued by its large shareholders in excess of the lesser amount between 1/1,000 of its equity capital and KRW 1 billion
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* The act of exercising voting right of the stocks issued by its large shareholders 4. Prohibition of large shareholders exertion of unfair influence * The act of requiring the insurance company to provide him with undisclosed material or information for the purpose of exerting unfair influence * The act of exerting unfair influence on the personnel administration or management of the insurance company in collusion with other shareholders or equity investors on the condition that he provides them with economic interests and other benefits * The act of receiving credits from the insurance company or the act of urging the insurance company to hold stocks or bonds issued by its large shareholders in excess of the ratio prescribed by the law * The act of extending credit to its large shareholders competitors on unfavorable terms 5. Measures to be taken when its large shareholders (their companies) are financially distressed * Prohibition of extending additional credit to its large shareholders * Prohibition of acquiring marketable securities issued by its large shareholders * Limitation of transactions with its large shareholders in the nature of financial supports An insurer shall not acquire shares of any other company in excess of 15% of the total outstanding shares of such company; provided, however, that subject to the approval of the FSS, it may acquire shares of its subsidiaries without limitation.
Groups Influence & Risks in Corporate Governance Being an affiliate of Samsung Group, Samsung Life has both merits in business and risks in corporate governance. The Company earns profits by selling insurance products and leasing real estate to other affiliates of the Group. In particular, the ratio of inter-affiliate sales is exceptionally higher in Samsung Life than in its competitors. These related-party transactions contribute to the enhancement of the Companys value.
[Comparison of Top Insurers Sales] Insurer Sales from Affiliates Samsung 1,851,840 Life Insurance Korea 47,456 Life Insurance Tong Yang 23,983 Life Insurance (unit: million KRW, %) Ratio 7.15 0.39 0.72
Moreover, Samsung Life sells insurance products to the Groups employees, which is not included in the official records. This also helps Samsung Life gain an advantage against competitors. Despite the aforementioned merits, however, transactions with affiliates and specially related persons can also create the risk of capital outflow.
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The biggest risk in Samsung Lifes corporate governance is that the Group and its controlling family can use the Company for their own interests. The Company has already invested a large amount of money in Samsung Motors, Samsung Card and other affiliates. It should be noted that Chairman Kun-Hee Lee, who resigned from office after the Samsung slush fund scandal in 2007, made a comeback in 2010. He also restored the Groups Strategic Planning Office that had been dismantled in the wake of the scandal. Now, Kun-Hee Lee and the Strategic Planning Office control the Groups operations even more strongly. Their presence is an important factor in Samsung Lifes decision-making process, which compromises the independence of the Companys BOD and increases risks in the Companys governance structure.
1) Financial Support to Samsung Card When Samsung Card went insolvent in 2003, Samsung Life and Samsung Electronics participated in Samsung Cards rights issue to acquire a 20% stake in it. They also provided more credits to Samsung Card. 2) Financial Support to Samsung Economic Research Institute During a three-year period from 2006 to 2008, Samsung Life paid 8 billion KRW to Samsung Economic Research Institute for a service which was not provided so that the Institute could cover its deficit resulting from various government-run research projects. This was revealed during a general inspection conducted by the FSS, for which the Company was sanctioned by the FSS. 3) Debt Guarantees to Samsung Motors In 1999, Samsung Group Chairman Kun-Hee Lee and Samsung Motors creditors signed an agreement on the liquidation of Samsung Motors debt. As the Groups major affiliate, Samsung Life agreed to provide debt guarantees to Samsung Motors. The Company still bears the contingent liabilities. Doubt over Stock Value When Samsung Life went public in May 2010, its stock price was considered to be overvalued. The Companys IPO was related to the liquidation of Samsung Motors debt. As Samsung Motors went insolvent in 1999, Chairman Kun-Hee Lee gave two million shares of Samsung Life to Samsung Motors creditors as collateral for the debt on condition that he would repay 2.4 trillion KRW by 2001, which was based on the premise that Samsung Lifes stock value would be 700,000 KRW per share. Then, Samsung Life and other affiliates entered into an agreement with the creditors that, if the value of Samsung Life shares provided by Kun-Hee Lee should fall short of principal and interest repayments, they would collectively
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repay the balance. Yet, Samsung Life remained unlisted for a considerable time, with its stock value undetermined. Finally, the creditor group brought the matter into court in 2006, alleging that the affiliates involved, including Samsung Life, should repay 4.7 trillion KRW. Then, the court sharply reduced the amount of interest, and the creditors appealed against the decision. While the case was pending in the Court of Appeals, Samsung Life went public at 1,100,000 KRW per share in May 2010. Due to the IPO of Samsung Life, the Group can now repay 2.3 trillion KRW, which was decided at the first trial, without additional payment by the affiliates involved. Still, they may have to repay a maximum of two trillion KRW according to the ruling of the Court of Appeals, since the creditors still claim the repayment of 4.7 trillion KRW. In conclusion, the IPO of Samsung Life was closely related to the liquidation of Samsung Motors debt, and the stock price at the time of the IPO was overvalued so that the Group could repay the debt. On the other hand, Kun-Hee Lee still retains a 20% stake in Samsung Life, which is expected to be inherited in the future. If the Companys stock price goes down, it will reduce the tax burden of Lees inheritors, unless they want to pay the inheritance tax with shares. Transfer of Control Samsung Groups controlling family has never directly participated in Samsung Lifes management. The CEO of Samsung Life is usually an executive officer from the Groups Secretary Office. Jae-Yong Lee, who is Chairman Kun-Hee Lees son, has been recently promoted to Director of Samsung Electronics, but is not likely to sit on the BOD of Samsung Life. On the other hand, it is speculated that the Groups Strategic Planning Office will influence the Company more strongly.
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Management of Shareholdings in Affiliates Currently, Samsung Life is holding too many shares in affiliates for control purposes. As of the end of March 2010, the value of the Companys shareholdings in listed affiliates amounts to 10 trillion 891.4 billion KRW, which comes up to 8.18% of its total assets. The Company needs to manage these idle shares adequately, for example, by effectively unloading part of the shares. Minority Shareholders Have No Leverage to Improve Corporate Governance Minority shareholders can exercise their rights by soliciting the exercise of voting rights as proxy (0.01%~0.03% of the total outstanding shares) in order to hold directors accountable for damaging the Companys interest by illegal activities or mismanagement. Their rights include the right to bring shareholders derivative actions, the right to inspect accounting books, the right to make shareholder proposals and the right to nominate outside directors. Samsung Life is controlled by the powerful Samsung Group, and even financial supervisory authorities take a back seat in the case of Samsung Life. Thus, it is not easy for minority shareholders to improve the Companys corporate governance by exercising their ordinary rights. In the election of audit committee members, the voting rights of the largest shareholder are restricted by the three-percent rule. The Group controls 27% of the total voting stock in electing audit committee members who also sit as outside directors and 6.95% in electing audit committee members who also sit as internal directors. However, since only incumbent directors can be candidates for the Audit Committee, it is virtually impossible for minority shareholders to nominate audit committee members. Still, minority shareholders can exercise their veto. In conclusion, in cases where Samsung Life has serious problems related to corporate governance, minority shareholders need to consider the possibility of criminal charges in order to pressure the Companys management or controlling shareholder.
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Controlling Shareholder & Persons with Special Interest Kun-Hee Lee Samsung Everland Samsung Culture Foundation Samsung Life Foundation Samsung Gwangju Electronics Samsung Electro-Mechanics Samsung Fine Chemical Samsung SDS Cheil Worldwide Sub-Total Other Shareholders Shinsegye Foreign Shareholders ESOP Domestic Shareholders Sub-Total Treasury Stock Total 22,144,000 10,357,360 11,694,188 52,276,452 96,472,000 200,000,000 11.07 5.18 5.85 26.14 48.24 100.00 11.07 5.18 5.85 26.14 48.24 100.00 5.51 9.51 10.74 47.99 73.74 100.00 6.95 12.00 13.55 60.56 93.05 100.00 41,519,180 38,688,000 9,360,000 9,360,000 1,315,880 1,206,380 944,090 708,910 425,560 103,528,000 20.76 19.34 4.68 4.68 0.66 0.60 0.47 0.35 0.21 51.76 20.76 19.34 4.68 4.68 0.66 0.60 0.47 0.35 0.21 51.76 5.51 5.51 5.51 5.51 1.21 1.11 0.87 0.65 0.39 26.26 6.95
* Individual Restriction by 3% Rule: With respect to the election of an auditor who also sits as an outside director and an amendment to the Articles of Incorporation for the introduction/exclusion of the cumulative voting system, each shareholder holding more than 3% of the total voting stock cannot exercise the voting rights for the stock in excess of 3%. ** Collective Restriction by 3% Rule: With respect to the election of an auditor or an auditor who also sits as an internal director, the combined voting rights of the majority shareholder and the related parties cannot exceed 3% of the total voting stock. Besides, a shareholder holding more than 3% of the total voting stock cannot individually exercise the voting rights in excess of 3%.
Dilutable securities
Not applicable
* "the disparity between ownership and control right" is defined as [{the stakes directly held by the controlling family} {the voting rights exercisable by the controlling family}] 1) the disparity between ownership - control rights: voting rights - cash flow rights 2) the voting rights multiplier: voting rights/ cash flow rights 3) the higher the disparity in (1) or the voting multiplier in (2), the greater the risk of tunneling.
May. 2012
Jong-Nam Lee
Jan. 2013
Outside Director
Young-Jin Kim
Attorney at Law
May. 2012
Keun-Ok Ryu
May. 2012
May. 2012
9 * Remarks: the relationship with the controlling shareholder, interlocking positions in the affiliated entities, attendance rate of last year, newly elected or not
Auditor
Name Outside Director Outside Director Standing Keun-Ok Ryu Jong-Nam Lee Tae-Gon Moon Career Professor of Seoul Indusrty Univ.(Business) Chairman of Korea Future Association Former Officer of Board of Audit & Inspection of Korea End of Term May. 2012 Jan. 2013 Jan. 2013 Position or Committee Chairman Other Particulars* -
Right to bring shareholders derivative actions Right to claim injunctive relief for directors illegal activities Right t demand dismissal of di t / dit Ri ht to d d di i l f director/auditor Right to inspect accounting books Right to demand appointment of inspector Right to call an extraordinary shareholders meeting Shareholder proposal right
* *
10,000 250,000 250,000 250 000 500,000 1,500,000 1,500,000 500,000 2,000,000
2,000,000 2,000,000 6 000 000 6,000,000 6,000,000 6,000,000 6,000,000 6,000,000 6,000,000
1 1 3 3 3 3 3 3
Right to demand adoption of cumulative voting* * based on shares with voting rights
Allocation of New Stocks to the third party Possible but no special provision exists
Restriction on In case where a company that belongs to an FTC-designated large business group and/or its Establishment of Holding persons with special interest intends to establish a holding company, it must annul preexisting Company debt guarantees between the holding company and its subsidiary, or between its subsidiaries. Maintaining the debt-to-equity ratio under 200% Restriction on Practice of Publicly held subsidiaries 20%, non-publicly held subsidiaries 40% Cannot own a financial institution as a subsidiary Holding Company Cannot own stocks of entities other than the subsidiaries for the control purpose Transactions with specially related parties in excess of 10% of the company's equity capital or 10 billion KRW in the following cases; - Offering or trading funds in forms of provisional payments or loans. - Offering or trading securities, such as stocks or company bonds. - Offering or trading assets in forms of real estate or intangible property rights.
Restriction on Insurers Concurrent Operation of Life Insurance Business Prohibition of concurrent operation of life insurance business and non-life insurance business and Non-Life Insurance / Prohibition of operation of non-insurance businesses Business as well as NonInsurance Businesses Disqualification of officers: Persons who have been given criminal sanction or discharged due to violation of financial laws; Persons who served at any financial institution whose license Restriction on and permit were cancelled; Persons who held a responsible position at any troubled financial Qualifications of Officers institution and Concurrent Holding of Other Offices Officers of insurance companies shall not concurrently serve at other profit-making corporations.
Samsung Life Insurance [032830, KOSPI] 7. Adoption of the International Financial Reporting Standards ('IFRS')
Adopted or not Status in year 2009 Not Adopted Effect (Change in Net Asset) -
8. Dividend Policy
Related Provisions in AOI
Provisions Interim Dividend Stock cancellation/redemption Allowed Upon BOD's resolution /Approval by supermajority at the AGM
Treasury Stock
2008
Acquisition Value Book Value
1,299,336 -
1,516,036
1,321,991 -
1,400,901
35,850 80,914
44,570 88,784
Kun-Hee Lee
3.72 19.3
42.32 1.5
Everland Samsung
26.4 2.4
20.8
25.6
Samsung Life
35.3 7.5
Samsung
5.1
10.4
Samsung F& M
11.0
7.4
S1
Corp
11.5 Samsung fine 8.4 Chemical 10.7 Samsung General 3.9 Chemical 7.4 14.1
Hotel Silla Samsung Heavy I market Korea
65.3 51.0
41.0 Samsung
2.4
Samsung S
50.0
40.86
Credu
27.3
13.1
Samsung Engineering
12.6
Sansung Electronics
133,045,073 12,132,820
86,024,154 66,824,711 1,025,139 20,187,524 13,174,881 11,788,784 2,444,361 26,655,886 347,396 810,969 1,032,373 3,118,705 1,072,979 312,326 83,113 14,809 26,978 26 978 286,504 115,001 1,066,202 58,838 2,686,872 48,207 596,324 808,640 3,930,370 1,988,156 728,089 228,925 153,943 203,130 1,044,186 6,298,736 535,776 3,119,540 69,458 254,552 244,715 59,964 855,678 2,840,562 2,598,738 4,425,557 1,082,900 4,940,328 97,777 620,504 565,976 1,969,508 526,468 95,393 77,053 4,435 15,146 15 146 136,254 88,115 768,530 -2,429 1,525,564 44,528 210,899 100,435 2,315,875 1,409,259 344,061 176,282 49,404 61,823 1,020,915 5,646,206 324,348 1,949,319 62,717 173,605 119,966 38,846
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Copyright 2010 by the Center for Good Corporate Governance, 7th floor, Pirun Bldg., 214 Pirun-dong, Jongnogu, Seoul (Seoul 110-044 Korea). All rights reserved. All information contained herein is copyrighted in the name of the Center for Good Corporate Governance ("CGCG"), and none of such information may be copied or otherwise reproduced, repackaged, further transmitted, transferred, disseminated, redistributed or resold, or stored for subsequent use for any such purpose, in whole or in part, in any form or manner or by any means whatsoever, by any person without CGCG's prior written consent. All information contained herein must be construed solely as, statements of opinion and not statements of recommendation to purchase, sell, or hold any securities. All information contained herein is obtained by CGCG from sources believed by it to be accurate and reliable However, we make no warranty, expressed or implied, reliable. regarding the accuracy, completeness, or usefulness of this information. Under no circumstances shall CGCG assume liability with respect to the consequences of relying on this information for investment or other purposes.
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