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Samsung workers' bonus hits profits, upsets shareholders


Samsung workers' bonus hits profits, upsets shareholders


Samsung has put its workers ahead of shareholders by paying out a special employee bonus.

As a result fourth-quarter profit at the world’s largest smartphone maker is set to be well below forecast.

In its preliminary estimate Samsung said operating profit would be down six percent on the year and 18 percent from its record third quarter.

That did not please shareholders and the stock price dropped.

Earnings were also likely to have been hit by Samsung’s Galaxy S and Note smartphones losing out to Apple’s iPhone in the United States and Japan during the year-end holiday season.

In addition Samsung is braced for a tough year as Apple raises its China presence. The US company is also expected to release smartphones with larger screens.

Shareholders wait to see if they get a bonus too

The bonus paid out to staff was to commemorate Chairman Lee Kun-hee’s ‘New Management’ strategy.

That was in 1993 when he ordered lieutenants to “change everything except your wife and children” to transform Samsung Electronics from a mid-tier television set manufacturer into a global technology leader.

Analysts estimated the total cost of the bonus was 1 trillion won, or an average 3,000 euros for each of the company’s 240,000 employees.

“This (bonus) could increase pressure from some shareholders to raise shareholder returns, and I also do have some hopes for more payout either in the form of a share buyback or dividends,” said Kim Kyung-yoon, head of equities management at Kyobo Axa Investment Managers, which owns Samsung shares.

Like most South Korean companies, Samsung has kept its dividend yield low at around one percent or less, which is a primary reason its shares are not as valuable as global peers.

“We are not against paying bonuses to workers but at least the shareholders should get as much,” said Mark Mobius, executive chairman of Templeton Emerging Markets Group. “They should really celebrate the event with a big bonus, a bigger dividend, which may happen.”

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