"Profit Distribution Without Shareholders’ Approval Is Invalid"... Samsung Electronics Shareholder Group Announces Lawsuit Over 'Provisional Agreement'

Shareholders' Group: "Allocating 12% of Pre-Tax Operating Profit Is Illegal"

"We Will File for Damages If Strike Resumes"

The Korea Shareholders' Movement Headquarters, a shareholder group of Samsung Electronics, announced on May 21 that it has defined the tentative agreement on performance-based bonuses between labor and management at Samsung Electronics as "illegal" and declared the initiation of legal proceedings.

Minkyung Kwon, head of the Shareholders' Movement Headquarters, held a press conference to announce a shareholder letter for Samsung Electronics in front of the Korea Securities Depository in Yeouido, Seoul on the 18th. Photo by Yonhap News.

In a press release issued on the same day, the Korea Shareholders' Movement Headquarters stated, "The labor-management agreement to accumulate and allocate 12% of pre-tax operating profit is a 'disguised illegal dividend' in violation of mandatory provisions of the Commercial Act," adding, "As soon as the labor and management sign the collective agreement, we will file for an injunction to suspend its effect and a lawsuit to confirm its invalidity."

The Shareholders' Movement Headquarters also cited remarks made by President Lee Jaemyung at a cabinet meeting the previous day to put pressure on both management and the union. At the time, President Lee had strongly criticized the union's demands, stating, "It is something even investors cannot do to institutionally allocate a certain percentage of operating profit before taxes are deducted, and it is shareholders who are entitled to receive profit distributions." Based on President Lee's comments and current law, the Shareholders' Movement Headquarters presented the 'three-step principle' for the distribution of operating profits in a corporation: ▲tax priority ▲capital adequacy ▲shareholder entitlement.

The group argued, "While the tentative agreement is somewhat improved in that it takes the form of 'post-tax payment in the form of treasury shares,' its essence is a structure that accumulates and allocates a certain percentage (12%) of pre-tax operating profit in advance," and added, "This directly violates the principles of tax priority and capital adequacy."

Regarding the possibility of a strike following the rejection of the tentative agreement in a union member vote, the group further stated their intention to file a damages lawsuit in the event of a strike. The Shareholders' Movement Headquarters said, "Any industrial action resumed after the rejection, if aimed at profit distribution rather than wages or other working conditions, constitutes an 'illegal strike' and an abuse of the three basic labor rights," adding, "If a strike materializes, we will file a damages lawsuit against all union executive members and individual union members who actively participate, seeking compensation for rights infringements that combine losses from decreased sales due to production disruption, declines in share price, and reductions in dividend resources."

This content was produced with the assistance of AI translation services.