Samsung Electronics announced on the 17th that part of the excess profit performance bonus (PS) for executives will be paid in company shares. This marks a rare change in compensation policy among major domestic companies and is interpreted as an effort to strengthen executives’ sense of responsibility and enhance corporate value.
This decision by Samsung Electronics appears to be a bold and meaningful shift in corporate compensation policy. However, careful analysis is required to determine whether this policy will truly lead to long-term performance and an increase in shareholder value.
Compensation through shares is positively viewed as it can enhance executives’ accountability and establish a reward system directly tied to company performance. With stock-based compensation being widely adopted by global corporations, Samsung’s decision can be seen as an attempt to elevate its governance standards to a higher level.
However, the negative aspects cannot be overlooked. First, changing the method of performance bonus payments could impose excessive risk on executives. The company’s stock price is heavily influenced by external factors, such as global economic conditions or specific industry trends. If stock-based compensation is introduced without considering this volatility, there is a risk that executives might become overly focused on short-term stock price gains or make overly conservative decisions.
Additionally, if the policy is not designed to directly link executive performance with rewards, it risks becoming a mere formal change. Simply paying compensation in shares does not necessarily lead to an increase in corporate value.
While this decision reflects Samsung Electronics’ willingness to align with global standards, several improvements are necessary for this policy to be effective.
In particular, the transparency of compensation criteria and performance evaluation methods is crucial. Furthermore, the policy design must balance motivating executives with ensuring they do not become overly conservative in their decision-making.
As a global market leader, Samsung Electronics is expected to set a precedent with this compensation policy that benefits both shareholders and the company. However, to solidify this change, it is essential to enhance communication not only with executives but also with shareholders.
