Professor Florencio Lopez-de-Silanes and Rakhi Kumar, Yale MBA02 prepared this case as the basis

for class discussion rather than to illustrate the effective or ineffective governance of an organization.

CASE:

SAMSUNG ELECTRONIC CORPORATION:

GOVERNANCE OF CHAEBOLS

Copyright: Prof. Florencio Lopez-de-Silanes

Prof. Florencio Lopez-de-Silanes Case: Samsung Electronics

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INTRODUCTION

Prior to the Asian currency crises, South Korea was an investment destination for several

institutional investors and emerging market funds. Throughout the early nineties the country

experienced an economic boom. South Korean conglomerates, locally know as chaebols,

had diversified into various industries from cars to microchips. Samsung Electronics

Corporation (Samsung Electronics), a rising star in the Samsung Chaebol was considered to

be a high growth company. However, in 1997, the Asian currency crises magnified the

problem of the Chaebol structure and highlighted the need for governance reforms. By 1999,

a shareholder rights activist in South Korea - Prof. Hasung Jang had taken up the cause of

minority shareholders of Samsung Electronics. With the help of foreign institutional

investors, he planned to fight for governance reforms in South Korea. As a corporate

governance specialist, Samuel Smith, had been contracted by a large foreign institutional

investor to help reform Samsung Electronics.

KOREAN CHAEBOLS: Establishment, growth and structure.

In order to accelerate economic growth in the 1970’s, the Korean government formulated

industrial policies that encouraged investment in heavy and chemical industry (HCI).

Funded largely by government-controlled banks, affluent families took advantage of the

liberal policies and set up companies in these industries. By the end of the 1970’s

approximately 80 percent of fixed investment in the manufacturing sector was in HCI

businesses. Between 1962 and 1982, annual growth averaged 8.4%, although by the end of

the 1970’s production efficiency in priority sectors was falling. As a result, there was

excessive investment in the HCI industries and little allocation efficiency in the capital

markets1. Due to over investment in the HCI industry and small domestic markets,

companies began diversifying into unrelated businesses, giving birth to the Korean Chaebols.

Government intervention in resource allocation proved to be very costly. Enterprises that

had access to preferential policy loans or tax incentives tended to expand their businesses 1 The Institute for International Economics - Financial Services Liberalization in the WTO: Case Study of South Korea

Prof. Florencio Lopez-de-Silanes Case: Samsung Electronics

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rapidly without careful appraisal of investment projects. Since the government largely made

lending decisions, creditor banks had little incentive for credit evaluations or loan

monitoring. As a result, firms were heavily leveraged and borrowed from informal credit

markets as they were usually pressed for working capital. This structural weakness put the

economy on the verge of a financial crises in early the 1970s and then again in the 1980s2.

However, public purse bailing out of large enterprises became the norm and people were

made to believe that chaebols were too big to fail.

When the government decided to open up the South Korean economy, many of the protective

measures that local companies had enjoyed during the developmental era were removed.

Companies that had expanded into unrelated businesses found that they no longer had access

to government capital. Initially, banks were also not interested in financing these projects,

nor did they have the expertise to evaluate these new high-risk businesses. Hence, business

groups started creating their own group wide internal capital markets. Transfer pricing,

cross-shareholdings and cross-guarantee of debts were some of the mechanisms employed by

chaebols to fund expansion. They pooled any funds available to the subsidiaries to

supplement outside funding of new projects. Operations of these internal finance markets

were not necessarily based on efficiency in resource allocation but were often driven by the

interests and concerns of the controlling families.3 Many Chaebols invested overseas and

‘globalization’ was the new theme. However, the globalization strategy was not well

planned. Chaebols held onto the management strategy that they had been practicing over the

last thirty years: growth in size ignoring profitability; financial structure with high debt-to

equity ratio and cross debt guarantee among affiliated companies.4 By 1997 there were over

fifty chaebols in South Korea, each with a myriad of affiliated companies all linked to one

another through a complex network of cross-holdings. Ownership and affiliation details of

twenty chaebols are provided in Exhibit 1.

2 Family-Based Business Groups: Degeneration of Quasi-Internal Organizations and Internal Markets in Korea by Sang-Woo Nam, December 2001. 3 Ibid. 4 Corporate Governance and Economic Development: The Korean Experience by Ha Sung Jang.

Prof. Florencio Lopez-de-Silanes Case: Samsung Electronics

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THE SAMSUNG GROUP: It is all in the family.

Founded in 1938 by Mr. Byung Chul Lee, Samsung Group’s original line of business was

exporting dried fish, vegetables and fruits produced around Korea to Manchuria and Beijing

in China. Within a few years of incorporation, the company expanded its operations to

include manufacturing and sales when it set up a flourmill and bought confectionary

machines. In the 1970’s it diversified into the petrochemical, electronics and heavy

industries. By early 1990’s, the Samsung Group had grown into the fourteenth largest

company in the world. It had diversified into four primary industries, and had over twenty-

five affiliated companies.

Like most Korean companies, the Samsung Group structure developed into a confusing maze

of cross-ownership among affiliated companies. Exhibit 2 provides a list of affiliated

companies in the Samsung Chaebol while Exhibit 3a and 3b shows the complex cross-

ownership structure among the affiliated companies. For example, according to Exhibit 3a,

affiliated companies owned 15.83% of Samsung Electronics. Exhibit 3b provides the break

up of ownership between affiliates. Therefore, Samsung Company owns 4.45% of Samsung

Electronics, Samsung Life Insurance owns 8.16% and so on. By 1997, combined annual

revenues of all the businesses in the group were close to USD 100 billion, with profits

reaching USD 290 million. The Samsung Group constituted approximately 10% of the total

market value of all companies listed on the Korean stock market. However, like all other

chaebols, its debt-to-equity ratio hovered around 365%.

SAMSUNG ELECTRONICS CORPORATION: Governance of Cheabols.

Samsung Electronics was established in 1969. By the mid 1990’s, it had strategically

invested in research and development of DRAM chips and had grown into a billion dollar

company. Exhibit 4 shows the contribution made by Samsung Electronics to the overall

revenues and profits of the Samsung Cheabol. By the late 1990’s, Samsung Electronics had

24 production subsidiaries, 35 sales subsidiaries and 20 branch offices around the world

including North America, Europe, Southeast Asia, Central Asia, China and Latin America. It

Prof. Florencio Lopez-de-Silanes Case: Samsung Electronics

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managed four strategic businesses in the fields of Home, Mobile, Office Network and Core

Components.

However, in 1997, excess production capacity in the microchip industry lead to a downward

spiral in chip prices. Profits at Samsung Electronics plunged to new lows. The Asian

Currency crises compounded the problems facing the company. By late 1997, the company’s

debt totaled 13 trillion won (approximately USD 9 billion) and more than 70 percent of it

was in foreign currency loans5. The financial run on the economy by foreign institutional

investors saw the country’s currency tumble 10.6 percent. Domestic interest rates on three-

year corporate bonds hit 30.1 percent. The US rating agencies, in addition to downgrading

the sovereign debt to “junk bond” status, also lowered the credit worthiness rating for several

of the largest South Korean companies including Samsung Electronics6. The company’s

share prices reflected the macro and micro economic turmoil faced by the company. Exhibit

5 provides daily share prices of the Samsung Electronics stock on the Korean stock exchange

for a 15-month period starting September 1996. However, a liner trend line indicates that, by

and large, the share price was declining marginally but was above the 50,000 won mark.

After a period of negative results, minority shareholders started questioning governance

practices of the company. They alleged that Samsung Electronics had neither internal or

external corporate governance mechanism which acted as checks and balances and that all

management decisions were made taken by the Chairman. The internal mechanisms such as

Board of Directors and Auditors, did not function properly at least when it came to

monitoring the Chairman. For example they questioned the board’s decision of acquiring

shares of a firm, Ichon Electric, whose financial stability was shaky. This acquisition cost

Samsung Electronics 27.6 billion won when the company went bankrupt a few years later. 7

When things starting going wrong, neither the Chairman nor the Board of Directors took any

responsibility for failed investments or even for illegal activities. Instead the chaebol lobby

issued a report attacking minority activism. They said, “Minority shareholders’ rights to

demand compensation should be respected only in the event of embezzlement and other ill- 5 IR on the net: How they did it at Samsung Electronics. http://www.ironthenet.com/feature.asp?current=1&articleID=2289 6 Washington Post Foreign Service: South Korea Takes Three More Punches by Steven Mufson. 7 Korean IT News: Civic Group Challenges Samsung Chairman’s Alleged Mismanagement by Kim Deok-hyun.

Prof. Florencio Lopez-de-Silanes Case: Samsung Electronics

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intentioned behaviors. Managerial misjudgments should not be the subject of criminal

liabilities. Activism can also harm the interests of majority shareholder and decision-making

by management.” 8

In 1998, the Board of Directors of Samsung Electronics consisted of twenty-three members.

This number had been trimmed from the previous year when the board comprised of forty-

three directors. Exhibit 6 provides a profile of the directors on the board of Samsung

Electronics. Some shareholders believed that accounting manipulation and improprieties had

become standard practice and company funds had been used to make political contributions

in the Chairman’s name. A minister in the Korean cabinet faced corruption allegation that he

earned USD 1.4 million when he was given an interest-free loan from Samsung Electronics

and acquired the Company’s shares at a discount rate while he was an ‘outside’ director on

the company board.9 External mechanism such as markets for corporate control also did not

exist and legal protection of shareholder’s rights was limited. 10 Courts in Korea did not have

experience of dealing with corporate governance cases and often their rulings seemed to go

soft on the guilty. For example, the Suwon District Court ordered Samsung's Chairman Lee

to return to the Samsung companies 7.5 billion won in damages on charges of providing

bribes to former president Roh Tae-woo. However, the court did not demand that Lee take

legal responsibility for the two mismanagement cases of his group's subsidiaries, saying he

did not participate in the decision-making.11

Samuel Smith wondered if the allegations of the minority shareholders held any merit.

Internal and external economic forces had not changed much in the last decade, yet it was

only after the Asian currency crisis that these allegations were being made.

8 The Korean Herald: Chaebol face tough attacks from minor shareholders by Yoo Cheong-mo: February 25,1999. 9 AFX News Limited: South Korean education minister resigns amid corruption allegations; August 31, 2000. 10 Corporate Governance and Economic Development: The Korean Experience by Hasung Jang. 11 Korean IT News: Civic Group Challenges Samsung Chairman’s Alleged Mismanagement by Kim Deok-hyun.

Prof. Florencio Lopez-de-Silanes Case: Samsung Electronics

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HASUNG JANG: The voice of minority shareholders.

Dr. Hasung Jang is a well know minority shareholder rights activist in South Korea. He

received his MA in economics from the New York State University and a Ph.D. in finance

from the Wharton School. On returning to South Korea, he joined the Korean University as a

professor of finance and the director of the Center for Finance and Banking Research. As the

Chair of the Participatory Economy Committee, a minority shareholder protection civil

group, under the umbrella of the Peoples Solidarity for Participatory Democracy, Dr. Jang

took up the cause of shareholder rights in Korea. He undertook investigations to evaluate the

governance of chaebols and financial dealings among affiliated companies.

Dr. Jang targeted Samsung Electronics and made allegations of self-dealing transactions. In

particular he spoke about a transaction dated 24 March 1997, when Samsung Electronics

made a private placement of unsecured convertible bonds worth 60 billion won (US $46.1

million). He was troubled by the fact that the bonds had been sold to company insiders. The

Chairman’s son had purchased 45 billion won worth of bonds and another Samsung affiliate

had purchased the remaining bonds worth 15 billion won12. Dr. Jang alleged that this issue

was at unfavorable terms for the company and called into question the price of the bonds. On

their part, company executives explained that Samsung Electronics was badly in need of fund

and that international funding, which previously was the main source of capital had dried up

after the Asian currency crises. Further, as the company was finding it extremely difficult to

raise money from domestic financial institutions they had little choice but to privately place

the bonds. Besides the amount raised was less than one percent of existing long term loans.

Dr. Jang also alleged that Samsung Electronics had both directly and indirectly funded the

Samsung Groups’ doomed venture into the car industry at the expense of minority

shareholders. Samsung Electronics had acquired a 21.1% stake in Samsung Motors at the

acquisition cost of 170 billion won (USD 106 million). The indirect investment of Samsung

Electronics into Samsung Motors was in the form of a joint investment agreement between

12 Nascent Stages of Corporate Governance in an Emerging Market: regulatory change, shareholder activism and Samsung Electronics by Hasung Jang and Joongi Kim. Corporate Governance Volume 10 Number 2 April 2002.

Prof. Florencio Lopez-de-Silanes Case: Samsung Electronics

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an Ireland-based paper company called Pan-Pacific Industrial Investments (PP) and Samsung

Electronics (and two of its affiliated companies). At first glance the PP agreement looked

like a direct investment into Samsung Motors by a foreign entity (PP) in accordance with

Korean laws regulating foreign exchange. However, under the terms of the joint venture

agreement, Samsung Electronics had guaranteed PP a certain rate of return through put and

call options within a specified redemption period, on Samsung Motor shares it (PP) owned.

This arrangement was made in addition to bridge loans made by Samsung Group to PP. Dr.

Jang alleged that that this transaction was not a clear direct investment and in fact violated

legal requirements for other types of transactions. Samsung Electronics rebutted the

allegations and explained that the put and call options were just clauses in the agreement put

there to provide additional security for PP. The Company was more like a third party in the

transaction and the agreement did not have any financial implications for the shareholders.

SAMUEL SMITHS TASK

1997 had been a troubled period for Korean companies. The country had experienced a

severe economic shock, which had practically destroyed the economic structure that had

developed over the past four decades. It was confusing and upsetting times for companies

and investors, all of whom has suffered tremendous loss. Sam had to objectively analyze the

allegations made by the minority shareholders and check for fundamental problems at the

company. Naturally, dealing with an emerging market came with its challenges. For one,

economic data was scarce and very little corporate information was publicly available. As

Sam sat down to prepare for his meeting with his client he made a list of questions he needed

to answer.

1. What are the benefits and disadvantages of the Korean chaebol structure? In

particular what governance issues can arise due to this structure?

2. Analyze the capital structure of Samsung Electronics. Compare it with the capital

structure of a company in the similar line of business (primarily manufacture of

chips) from another developed country and comment on the differences.

Prof. Florencio Lopez-de-Silanes Case: Samsung Electronics

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3. If Samsung Motors makes an after tax profit of USD100 million, what share of that

would go to the Lee family (owners)? What percentage of Samsung Motors do they

directly own? (Note: You do not have to provide the exact number. A good

approximation will be adequate.)

4. The client wants to recommend governance changes with special emphasis on the

board of directors. Evaluate the current board of Samsung Electronics. What are the

strengths and weaknesses in the current board composition? How many directors can

be classified as non-executive? How many can be classified as independent? What

are your criteria’s for assessing director independence? Do you think changes need to

be made to the current board composition? If no - why not, if yes - what changes

would you recommend?

5. Based on the company’s financials as of December 31, 1997 and publicly available

information, investigate the allegations made by Dr. Jang. Do you think the

convertible bond issue was a self-dealing transaction? How would you prove that

claim? What evidence do you have on you claim? (Note: you are not expected to do

a DCF.)

6. Does the agreement with the Pan-Pacific Industrial Investment resemble a simple

direct investment or something else? Why was the guarantee clause included in the

contract? Does it change the instrument? If you were on the Audit committee of the

company what questions would you ask about this transaction?

Prof. Florencio Lopez-de-Silanes Case: Samsung Electronics

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Exhibit 1: Share Ownership and Affiliates of Chaebols

Cheabol

Controlling Family

Ownership (%)

Ownership Affiliates

(%)No. of

Affiliates

No. of listed

Affiliates

LG 5.00 30.20 44 8 Hyundae 20.98 28.57 28 9 Sam-sung 8.50 30.11 27 12 Lotte 36.05 35.74 22 3 Dae-woo 6.49 24.35 18 7 Han-Wha 6.61 29.60 17 6 Doo-San 13.88 43.19 17 5 Ssang-Yong 6.45 35.95 15 7 SK 12.62 22.94 13 3 Han-Jin 27.73 20.36 12 5 Dae-Rim 5.72 17.07 12 5 Kolon 4.57 37.92 12 4 Hyo-Sung 18.56 18.64 11 2 Han-il 23.91 28.35 11 5 Dong-Kuk steel 21.22 37.70 10 4 Kum-Ho 16.31 14.20 10 5 Kia 2.48 21.29 8 2 Sam-mi 15.33 25.64 6 2 Dong-Bu 14.36 25.52 6 5 Koryo textile 5.33 29.76 5 1 Hai-Tai 6.38 30.09 5 2 Kukdong Const 11.29 43.24 3 2

Source: Business Groups in China Compared with Korean Chaebols by Keun Lee and Wing T. Woo

Notes: Data as of 1989 with the exception of LG (1992)

Prof. Florencio Lopez-de-Silanes Case: Samsung Electronics

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Exhibit 2: Affiliated companies within the Samsung Group

Industry Affliated Companies

Electronics Samsung ElectronicsSamsung Electro-MechanicsSamsung SDISamsung CorningSamsung SDSSamsung NetworksSamsung Corning Precisions Glass

Machinery & Heavy Industries Samsung Heavy IndustriesSamsung Techwin

Chemicals Samsung General ChemicalsSamsung PetrochemicalsSamsung Fine ChemicalsSamsung BP Chemicals

Financial Services Samsung Life InsuranceSamsung Fire & Marine InsuranceSamsung CardSamsung SecuritiesSamsung CapitalSamsung Investment Trust ManagementSamsung Venture Investment

Miscellaneous Samsung EngineeringCheil IndustriesSamsung EverlandShilla Hotel & ResortsCheil CommunicationsSI CorporationSamsung LionsSamsung Medical Center

Note: This table shows the most important affiliate companies within the Samsung Group for the period of interest.

Prof. Florencio Lopez-de-Silanes Case: Samsung Electronics

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Exhibit 3a: Ownership structure of Companies in the Samsung Chaebol.

(all figures in %'s)

No. Name of FirmsOwner Family

Non-profit foundation

Directors &

ManagersSelf-

Owned

Total of Affiliate

Firms

1 Samsung Electronics 5.41 0.13 0.16 3.52 15.83 2 Samsung Display Devices 2.44 0.19 2.89 19.77 3 Samsung Co. 2.32 0.49 0.13 5.17 19.55 4 Samsung Motors 30.60 38.36 5 Samsung Heavy Industries 0.02 0.08 27.35 6 Samsung Electro-mechanics 0.46 1.42 27.54 7 Samsung Life Insurance 15.00 5.00 25.00 2.25 8 Samsung Aerospace Industries 0.05 0.03 26.47 9 Cheil Wool Textile 3.23 0.10 3.00 2.20

10 Samsung General Chemicals 89.39 11 Samsung Precision Chemicals 0.74 39.15 12 Samsung Corning 49.36 13 Hotel Shilla 0.21 1.35 12.67 14 Samsung Securites 0.85 0.84 0.64 0.01 22.33 15 Samsung Engineering 0.30 31.20 6.20 6.23 16.03 16 Samsung Winners Card 90.27 17 SI Corporation 0.06 22.48 18 Samsung Everland 67.30 23.99 19 Samsung Factoring Financing 100.00 20 The Joong-Ang Daily News 41.80 14.92 21 Samsung Petro-Chemicals 36.33 22 Samsung Commercial Motors 100.00 23 Samsung Fire & Marine Insurance 0.36 4.50 0.68 3.98 13.05

Source: Business Group in China Compared with Korean Cheabols by Keun Lee and Wing T. Woo

Prof. Florencio Lopez-de-Silanes Case: Samsung Electronics

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Exhibit 3b: Detailed Break-up of Affiliate Shareholding Provided Above

(all figures in %'s)

No. Name of Firms 1 2 3 5 6 7 8 9 14 18 20 23

1 Samsung Electronics 4.45 8.16 0.61 0.01 0.15 0.45 2.00 2 Samsung Display Devices 10.87 5.39 0.01 0.28 3.19 3 Samsung Co. 6.22 0.09 13.24 4 Samsung Motors 21.11 7.45 2.48 6.08 1.24 5 Samsung Heavy Industries 18.92 0.28 2.56 4.92 0.07 0.60 6 Samsung Electro-mechanics 21.92 5.59 0.03 7 Samsung Life Insurance 2.25 8 Samsung Aerospace Industries 8.13 10.14 7.75 0.12 0.33 9 Cheil Wool Textile 2.20

10 Samsung General Chemicals 3.82 10.40 37.79 10.28 25.90 0.90 0.30 11 Samsung Precision Chemicals 9.31 12.74 6.20 0.21 0.29 3.45 3.51 3.44 12 Samsung Corning 48.36 1.00 13 Hotel Shilla 5.72 6.95 14 Samsung Securites 1.47 10.62 4.75 5.49 15 Samsung Engineering 16.03 16 Samsung Winners Card 54.37 14.40 21.50 17 SI Corporation 11.39 9.95 0.13 1.01 18 Samsung Everland 1.89 5.00 17.10 19 Samsung Factoring Financing 74.75 25.00 0.25 20 The Joong-Ang Daily News 3.92 2.50 8.50 21 Samsung Petro-Chemicals 9.93 10.00 16.40 22 Samsung Commercial Motors 100.00 23 Samsung Fire & Marine Insurance 11.49 1.56

Source: Business Group in China Compared with Korean Cheabols by Keun Lee and Wing T. Woo

Decomposition of shares by major affiliates

Prof. Florencio Lopez-de-Silanes Case: Samsung Electronics

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Exhibit 4a: Contribution of Samsung Electronics (parent company only) to Samsung

Group.

Exhibit 4b: Contribution of Samsung Electronics (consolidated basis) to Samsung

Group.

All figures in Billion Won

1997 1998 1999 1997 1998 1999 1997 1998 1999

Sales 18,465 20,084 26,118 161,448 85,788 106,730 11.4% 23.4% 24.5%Net Income 124 313 3,170 487 238 2,511 25.5% 131.5% 126.2%

Assets 23,066 20,776 24,710 187,824 109,022 133,213 12.3% 19.1% 18.5%Liabilities 17,236 13,806 11,378 162,120 89,839 101,023 10.6% 15.4% 11.3%Shareholders Equity 5,830 6,970 13,332 25,704 19,183 32,190 22.7% 36.3% 41.4%

Source: Samsung Website

Samsung Electronics (parent company)

Samsung Group Samsung Electronic (parent co.) as a % of Samsung Group

All figures in Billion Won

1997 1998 1999 1997 1998 1999 1997 1998 1999

Sales 22,682 25,772 32,088 161,448 85,788 106,730 14.0% 30.0% 30.1%Net Income (610) (362) 3,175 487 238 2,511 -125.3% -152.1% 126.4%

Assets 32,035 24,105 29,178 187,824 109,022 133,213 17.1% 22.1% 21.9%Liabilities 27,386 19,016 16,004 162,120 89,839 101,023 16.9% 21.2% 15.8%Shareholders Equity 4,649 5,089 13,174 25,704 19,183 32,190 18.1% 26.5% 40.9%

Source: Samsung Website

Samsung Electronics (consolidated)

Samsung Group Samsung Electronic (parent co.) as a % of Samsung Group

Prof. Florencio Lopez-de-Silanes Case: Samsung Electronics

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Exhibit 5: Closing price of Samsung Electronic Shares and the Liner Trend of its Stock

Price.

Daily Closing Price of Samsung Electronics SharesSeptember 1, 1996 to December 31, 1997

-

10,000.0

20,000.0

30,000.0

40,000.0

50,000.0

60,000.0

70,000.0

80,000.0

10/1

/96

11/1

/96

12/1

/96

1/1/

97

2/1/

97

3/1/

97

4/1/

97

5/1/

97

6/1/

97

7/1/

97

8/1/

97

9/1/

97

10/1

/97

11/1

/97

12/1

/97

Day

Shar

e Pr

ice

in K

orea

n W

on

Close Linear (Close)

Prof. Florencio Lopez-de-Silanes Case: Samsung Electronics

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Exhibit 6: Profile of Directors on the Samsung Electronics Board

Note: The information provided in this exhibit is for illustrative purposes only. It does not reflect the real board

structure at the Samsung Electronic Corporation.

No. Name of Director Designation Family Relation1 Kun-Hee Lee Chairman & CEO, Samsung Electronics None

2 Jong-Yong Yun Vice Chairman & CEO, Samsung Electronics None

3 Hak-Soo Lee President & CEO, Group Reformation Headquarters, Samsung Electronics

None

4 Yoon-Woo Lee President & CEO, Device Solutions Network, Samsung Electronics

None

5 Dae-Je Chin President & CEO, Digital Media Network, Samsung Electronics

None

6 Doh-Seok Choi President & CFO, Samsung Electronics None

7 In-Joo Kim Executive VP, Group Reformation Headquarters, Samsung Electronics

None

8 Jing-Wan Kim President & CEO, Samsung Heavy Industries None

9 Sung Rai Choi President & CEO, Samsung Petrochemicals None

10 Soon-Taek Kim Vice President & CEO, Samsung SDI Company Ltd. None

11 Jin-Hoon Je Vice President & CEO, Samsung Factor Financing None

12 Joong-Koo Lee President & CEO, Samsung Techwin Company Ltd. None

13 Yang-Gyu Park President & CEO, Samsung Networks None

14 Hong-Sik Ko President & CEO, Samsung General Chemicals Company Ltd.

None

15 Soo-Woong Park Vice President & CEO, Samsung Fine Chemicals Ltd. None

16 Jae Yong Lee Owns 25.1% of the shares of Samsung Everland, which controls Samsung Life, the holding company of Samsung Group

Son of Kun-Hee Lee

17 Ra-Hee Hong Lee Director General, Samsung Museums. Wife of Kun-Hee Lee

18 Soo-Bin Lee Chairman & CEO, Samsung Life Insurance Company None

19 Hyeon-Gon Kim Vice President & CEO, Samsung BP Chemicals Company Ltd.

None

20 Chong-Yeul Pae CEO, Samsung Corporation None

21 Kap-Hyun Lee Advisor, Boston Consulting Group None

22 Suk-Soo Kim President Law Office of Suk-Soo Kim None

23 Tetsuo Iwasaki Chairman/CEO/President Applied Komatsu Technology

None