(March 11): Samsung Electronics Co and SK Inc said they plan to cancel a combined 20.8 trillion won of treasury shares, one of the largest such moves by South Korean conglomerates as firms respond to governance reforms aimed at boosting shareholder returns.
The cancellations highlight a broader push to improve corporate governance and narrow the so-called "Korea discount" — the persistent valuation gap between local equities and global peers, typically linked to corporate governance issues.
The Kospi’s blistering rally, making it one of the world’s best-performing major equity benchmarks over the past year, has been driven in part by expectations that companies will follow through on governance changes. The latest announcements from two of the country’s most prominent business groups suggest the reform momentum in Asia’s fourth-largest economy is gaining traction.
Samsung Electronics will cancel 87 million treasury shares, including preferred stock, in the first half of the year, the company said in its annual report and an emailed statement Tuesday. SK will retire 4.8 trillion won of treasury shares — about a fifth of its outstanding stock — in what would rank among the largest cancellations undertaken by a South Korean chaebol.
Such moves typically boost earnings per share and improve return on equity, metrics closely watched by global investors who have long cited governance concerns when discounting Korean equities. SK Inc shares jumped as much as 15% at the open on Wednesday. Samsung advanced 3%.
“SK plans to lead the maximisation of shareholder value through proactive corporate value enhancement reflecting the intent of the revised Commercial Act,” the company said in a text message. Retiring about 20% of its shares marks a significant shift in the group’s capital policy.
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The plans follow amendments to South Korea’s Commercial Act passed last month that require companies to cancel treasury stock, marking a move away from using such holdings as a control mechanism and toward policies that enhance shareholder value.
Investors have rewarded companies outlining similar steps. Among the biggest gainers in last Thursday’s big rally were Mirae Asset Life Insurance Co, which soared 30% after announcing a treasury-share cancellation plan, and SK Securities Co, which jumped 17% following a stock consolidation.
The timing is notable as South Korea enters its annual general meeting season, which typically peaks in March. This year’s meetings are expected to test the new governance regime, with institutional investors and proxy advisers focusing more closely on board independence, shareholder-return policies and capital allocation.
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