Uri Party Could Give Samsung Five-Year Stock Law Waiver

The ruling Uri Party is weighing whether to give financial affiliates of Samsung Corp. a five-year grace period on selling the stock of other Samsung branches that they hold which accounts to more than the legal limit of five percent.

On the surface, the move looks like a favor for Samsung, but it is expected to invite controversy since the suspension has a prerequisite condition of stock selling.

Lawmaker Chung Sye-kyun, the floor leader of the Uri Party, said in a phone interview with this paper on September 27, “ In order to establish the frame of fair market economy, companies, which violate the “five percent rule” have to sell its excess stock,” adding, “But, we need to give some time to subjected business to buffer ensuing shocks.”

Another official from the Uri Party said, “A decision on the period of the suspension has not been settled, but many people consider five years will be enough.”

The ruling party has not made a conclusion on how to deal with the 7.21 percent of Samsung Electronics and the 25.64 percent of Samsung Everland stock held by Samsung Life Insurance and Samsung Card, respectively.

The government views that it cannot direct businesses to sell extra stock that they owned before the Financial Industry Structure Reform Law was revised.

Meanwhile, some lawmakers from the ruling party, like lawmaker Park Young-sun, have argued that the revision should cover all the stock that companies possess.

Under the circumstances, President Roh Moo-hyun revealed his opinion at a meeting with directors of economic divisions at major media companies, saying, “Even if Samsung may not agree on regulations on governance structure and industrial capital, the company should try to follow the rules as long as they are a social norm.” The remark can be translated as his support for the ruling party.

At the beginning of the meeting, the president showed that he had changed his stance on the issue when he said, “The government can exercise flexibility while it does not lose face and Samsung defends its management rights,” adding, “Reasonable solutions should be prepared.” However, that does not mean the government has decided not to support retroactivity of the law.

Samsung has a cycle for stock holding in the following order: Samsung Card, Samsung Everland, Samsung Life Insurance, Samsung Electronics and Samsung Card. So, the entire governing structure will be changed if Samsung Card and Samsung Life Insurance each sell their stock in Samsung Everland and Samsung Electronics.

Ki-Jeong Ko In-Jik Cho koh@donga.com cij1999@donga.com