Samsung backs away from planned split

SEOUL: The world’s biggest smartphone maker, Samsung, assailed by a shambolic recall and embroiled in South Korea’s wide-ranging corruption scandal, on Friday backed away from a planned corporate restructuring.

Following the embarrassing recall of the Galaxy Note 7 smartphone and under pressure from activist shareholders to improve corporate governance, Samsung Electronics said last year that it was considering splitting the company in two.

Its vice chairman Lee Jae-Yong, heir to the parent Samsung group, has since been arrested and indicted for bribery, along with four other senior executives, in connection with the graft scandal that saw ex-President Park Geun-Hye impeached.

But at the Samsung Electronics annual general meeting in Seoul, Board Chairman Kwon Oh-Hyun said the firm had reviewed legal and tax issues around proposed division into a holding company and an operating unit, and identified “some negative effects.”

He did not elaborate, but told shareholders: “At this moment, it seems difficult to carry it out.”

Shares in Samsung Electronics — the group’s flagship subsidiary — closed 0.72 percent down, having hit record highs this year on expectations of higher profits.

Samsung SDS plunged 8.47 percent and Samsung C&T was down 7.27 percent.

Various Samsung units have cross-shareholdings in other parts of the group, a byzantine structure that enables the Lee family to control the business empire, which has revenues equivalent to a fifth of South Korea’s gross domestic product (GDP).

A promised new governance committee, made up of independent outside directors, will still be set up by the end of April, Kwon said.

But Samsung Electronics had so far been unable to recruit “foreign directors who have experience as chief executive officers of global companies” to join it, he said “due to uncertainties in the internal and external environment surrounding the company.”