South Korean antitrust watchdog criticized Samsung's corporate ownership structure earlier today, having specifically targeted the circular shareholding practices that allowed the founding Lee family to maintain a tight grip of the country's largest conglomerate despite officially only owning a minority stake in it. While speaking to reporters on Thursday, Korea Fair Trade Commission Chairman Kim Sang-jo said "the current ownership and control structure of Samsung Group, which goes from Vice Chairman Jay Y. Lee to Samsung C&T to Samsung Life Insurance to Samsung Electronics, is not sustainable."
While the structure that involves Samsung affiliates owning stakes in one another allows founders to continue controlling their companies while still benefiting from the public capital markets and were previously even used for circumventing inheritance tax, investors have often criticized firms that resort to them based on the fact that circular shareholding lowers the perceived value of any particular stock. That sentiment was at the center of a late 2016 push from American hedge fund Elliott Management that advocated for Samsung splitting itself into two. Prior to joining Korea's antitrust regulator, Mr. Kim called for a similar move, with the chaebol considering the idea two years ago but ultimately dismissing it as being too complex to reliably execute.
Samsung is now said to be planning to sell some of the circularly owned shares of its business and streamline its corporate structure in the process of doing so. The plan has reportedly been approved by Samsung Group scion Jay Y. Lee shortly after he was released from prison on a suspended sentence over bribing top government officials earlier this year, despite the fact that a more straightforward structure would weaken his grasp over the conglomerate. The transition still isn't expected to include $26 billion worth of Samsung Electronics stock owned by Samsung Life Insurance, with Mr. Kim on Thursday targeting that pool of shares in particular. Samsung Electronics Vice Chairman Yoon Boo-keun said the Seoul-based tech giant will consider such a move. Mr. Lee is presently touring the world and meeting with industry leaders, including those from Samsung's direct rivals, having been keeping a low profile ever since an appellate court freed him in early February.