Yeo Myung-koo (left), head of the People Team at Samsung Electronics’ Device Solutions (DS) Division, and Choi Seung-ho (right), chair of the Samsung Electronics chapter of the Samsung Group Supra-Enterprise Labor Union, join hands with Labor Minister Kim Young-hwan after signing a tentative wage agreement at the Gyeonggi Regional Employment and Labor Office in Jangan-gu, Suwon, Gyeonggi Province, on the 20th. Yonhap News
Samsung Electronics (005930.KS) has decided to pay performance bonuses to employees of its semiconductor (DS) division in treasury shares, a move analysts say will achieve two goals at once: preventing the departure of core talent and enhancing shareholder value.
Samsung Electronics’ management and labor union reached a tentative agreement on Friday to pay special performance bonuses for the DS division in treasury shares over the next 10 years. One-third of the shares granted can be sold immediately, while the remainder will be subject to selling restrictions of one year and two years, respectively. This contrasts with SK hynix (000660.KS), which uses 10% of operating profit as the bonus pool and pays 80% in cash in the same year and the remaining 20% over the following two years. While hynix retains talent through deferred cash payments, Samsung has chosen a lock-in strategy that ties employees to the company through compensation linked to share price gains and tax deferral benefits.
The industry is also paying attention to the share price boost from large-scale treasury stock purchases. Management and labor agreed to set the bonus pool at 10.5% of the year’s business performance. According to the union, business performance effectively refers to operating profit.
According to financial information provider FnGuide, Samsung Electronics’ operating profit forecast for this year (average over the past month) stands at 353 trillion won. Applying this figure, treasury stock purchases of 37 trillion won would be required this year alone. In 2027 (449 trillion won) and 2028 (445 trillion won), treasury stock purchases of 47.145 trillion won and 46.725 trillion won, respectively, would be required.
The current treasury stock holdings of Samsung Electronics are insufficient to cover this. As of October 24, Samsung Electronics held 82,086,705 treasury shares (a 1.4% stake, worth 13.4027 trillion won). About half of this is allocated for existing employee stock compensation (PSU and OPI), while the rest is slated for cancellation. Samsung Electronics previously announced a total treasury stock cancellation plan worth 16 trillion won in March, having already canceled 5.3 trillion won worth last month.
“Given that Samsung Electronics’ market capitalization is around 1,600 trillion won, the immediate impact on the share price from treasury stock purchases of tens of trillions of won may be limited,” said Shin Seung-jin, head of the investment information team at Samsung Securities. “However, since steady stock purchase demand will be generated over the next 10 years, there will be a broad shareholder value enhancement effect.”