Samsung Electronics Moves Toward Equity-Based Compensation, Earning Praise and Criticism | Be Korea-savvy

Samsung Electronics Moves Toward Equity-Based Compensation, Earning Praise and Criticism


Samsung Electronics headquarters in Seocho District (Image courtesy of Yonhap)

Samsung Electronics headquarters in Seocho District (Image courtesy of Yonhap)

SEOUL, Jan. 21 (Korea Bizwire) The Korea Corporate Governance Forum (KCGF) lauded Samsung Electronics for its decision to award executive performance bonuses in company stock, calling it “a significant step toward an advanced compensation model.”

In a statement issued on January 20 by Chairman Lee Nam-woo, the forum noted that this marks an important first step in addressing the misalignment between shareholders, the board, and employees.

The announcement follows KCGF’s recommendation in October 2024 to adopt globally recognized stock compensation systems, such as Restricted Stock Units (RSUs) commonly used in Silicon Valley. At the time, the forum argued that these systems would elevate Samsung’s employee compensation framework to global standards.

KCGF expressed optimism that the stock-based incentive system could boost morale among technical staff and help align the company’s management with shareholder interests. “If Samsung overcomes its historically hierarchical ‘management culture’ and adopts shareholder value enhancement as a core principle, this could mark a new chapter for the company,” the forum stated.

However, KCGF also highlighted shortcomings. “While the initiative is meaningful, the absolute value of stock grants and the attached conditions make it less compelling as a long-term incentive for key technical talent,” the forum said, pointing out that the plan diverges significantly from Silicon Valley’s stock compensation practices, which focus on retaining top talent and preventing attrition.

The forum estimated that granting an average of ₩300 million in stock compensation per executive could cost Samsung Electronics ₩200 billion to ₩400 billion annually.

Yet, it argued that the scale remains insufficient to compete with Silicon Valley firms. For example, Meta distributed ₩17 trillion in stock compensation to employees in 2022, while Tesla offers newly hired engineers more than ₩100 million in stock as an initial incentive.

KCGF emphasized that Samsung must prioritize its technical talent—engineers, scientists, and designers—to navigate current challenges effectively. “Samsung Electronics must devote itself entirely to technology and offer substantial incentives to its key innovators if it hopes to overcome the crisis it faces,” the forum urged.

The move reflects Samsung’s effort to modernize its compensation practices, but critics argue it still falls short of global standards, leaving room for improvement in retaining top-tier talent.

M. H. Lee (mhlee@koreabizwire.com)

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