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Conflict of interest concern at Samsung Electronics

26-03-2012 | Nieuws | Peter van der Werf As Engagement Assistant Peter van der Werf reports, a potential conflict of interest meant that Robeco voted against the election of a nominee for Samsung’s audit committee.

The most interesting item on the agenda of Samsung Electronics’ 16 March AGM was a management proposal to spin off its LCD business division, which will be known as Samsung Display Co. The spun-off company will be fully owned by Samsung and will not be listed on the stock exchange.
 
Robeco had discussed the proposal with representatives of the South Korean consumer electronics giant at our office. “In our opinion, the spin-off makes strategic sense, given Samsung’s view of the market and the focus of its strategy,” notes Peter van der Werf.

Robeco voted against one audit committee nomination
Even so, the agenda contained other issues that prompted Robeco to vote against management. “That is because the board does not meet the 50% independence requirement,” he adds. “By our standards, one of the supposedly ‘independent’ nominees could actually be regarded as an ‘affiliated’ nominee.” Robeco voted against this affiliated nominee in the election for the audit committee.

What’s the concern here? “The issue is that this nominee is an attorney at a law firm that provides legal services to the Samsung group,” explains Van der Werf. “There is a potential conflict of interest arising from engaging in a professional relationship with one of the directors, and that is creating unnecessary tensions.”

After all, it is possible that the director may be forced to weigh the law firm’s interests against shareholders’ interests when involved in board decisions.

Most shareholders were insufficiently concerned about this issue to reject this nominee’s election, however: 96% of shareholders voted in favour of the election of all the board nominees.
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