"Samsung Electronics Board Of Directors Should Indemnify 12 Billion Won"

In the appeal suit lodged by Samsung Electronics small shareholders against Samsung Group Chairman Lee Gun-hee, the court judged that Samsung should indemnify 19 billion won, much less than 97.7 billion won previously decided by the original court, saying, "Shareholders cannot ask the management to completely make reparations for its failure to make the right decision for businesses."

22 small shareholders of Samsung Electronics, including Park Won-soon (senior director of Beautiful Fund), and lawyers filed a lawsuit against some 10 people, including Chairman Lee and the current and former directors of Samsung Electronics, arguing, "We have seen a lot of losses due to the slack management of Samsung Electronics". The High Court`s Civil Lawsuit Department 21 announced on November 20, "Chairman Lee should indemnify seven billion won, and five Samsung Electronics directors, including its former director and the current Minister of Information and Communication Jin Dae-jae, should pay 12 billion won altogether."

The court said, "The plaintiffs argued that they have lost an enormous amount of profit due to the bad decision of Samsung Electronics to acquire Yichon Electronics in March, 1997 without proper consideration. However, some adventures and risks will almost necessarily be involved, and if the management was asked to be responsible for all of its decisions, it would not be able to thrive and make a sound decision at all in the future." At the first court, some 27.62 billion won was asked to be paid by the management.

The court also said, "Samsung Electronics acquired 20 million shares of Samsung General Chemicals Corporation at a face value of 10,000 won each and sold them at 2,600 won each to realize a total loss of 62.6 billion won. Given the general circumstances of Samsung Electronics, we decided to have the directors pay 12 billion won, limiting their responsibility to 20 percent."

For the case of Chairman Lee appropriating Samsung Electronics property to deliver 7.5 billion won worth of bribes to the former President Roh Tae-woo, the court said, "Among the total 7.5 billion won, 500 million won cannot be indemnified since the amount cannot be covered by damage lawsuits. So we decided to make Lee compensate only seven billion won."

Civil groups resisted the court`s decision saying, "It is a pro-chaebol judgment which doesn’t consider the rights of small shareholders."

Soo-Kyung Kim skkim@donga.com