Introduction
Samsung Electronics Ltd is a technology company that has its operations based in South Korea. It is a global electronics company, which leads the pack in astonishing evolution and innovative strategies in technology, substantiating itself from the rest of its main competitors. This it does by identifying its major consumers as well as their preferences, and a robust research and development division focused on providing unmatched superiority in its brands. The company continues to chart new paths and channels of innovative ideas, creative discovery, and warm-hearted partnerships in their endeavor to create inventive product frontiers. Lately, Samsung Electronics has been on the global map due to its historically high growth as well as innovation that has created an almost exponential phase of growth of the company. Through its vast application of transformative technologies and innovation, the company has identified emerging opportunities and possibilities especially in developing countries (Samsung, 2014).
As at the end of June 2014, the total number of shares outstanding in the company was 170,132,764. Out of these, the number of common shares outstanding totaled 147,299,337 (or 86%) while that of preferred shares outstanding was 22,833,427 (or 13%). Total treasury stocks in Samsung Electronics were about 19,316,379 (or 11.4%). Out of the treasury stocks, 16,336,686 were common shares outstanding (or 11.1% of the common shares) while 2,979,693 were the preferred shares outstanding (or 13% of the preferred shares). On the company’s ownership structure, 55% of the company’s total stock is owned by foreign institutions while 15% is owned by domestic (South Korean) institutions. Other owners in the structure are: major shareholders and other parties (15%); treasury stocks (11%); and domestic individuals (4%). The majority shareholder in the company is an outsider – Mr. Kun-Hee Lee – who apparently owns both the common and preferred stock in the company (Samsung, 2014). Other individual major shareholders are: Ra-Hee Hong and Jae-Yong Lee who are family members of the company’s founder (both hold common stock); Oh-Hyun Kwon and Sang-Hoon Lee who happen to be members of the board of directors of Samsung Electronics. The two currently own the common stock. The major institutional shareholders consist of Samsung Corporation (an affiliate of Samsung Electronics); Samsung Welfare Foundation; Samsung Foundation of Culture; Samsung Life Insurance; and Samsung Fire & Marine Insurance, all of which are affiliate parties to Samsung Electronics. Of particular interest are the two institutions that have an ownership of over 5% in Samsung Electronics. These are: National Pension Service and Samsung Life Insurance (Samsung, 2014).
Overall, there seems to be the absence of a large number of major individual shareholders, apart from the ones set out in the security disclosures, in the company. The company can be therefore said to be owned – largely - by affiliate parties that comprise the highest levels of stock owned by institutions. In the same vein, it is evident that these large institutional shareholders have immense influence on the managerial actions seen at Samsung Electronics. The institutional shareholders, most being affiliate parties to the company, have been to advocating for strategies that gradually increase the stock value of Samsung Electronics. The decisions affected at the managerial levels by these shareholders are related to the focus of the company on innovation and technology as well as diversification as the company’s main platform for increasing its value and consequently its stock. For instance, some major decisions have been effected at the managerial level regarding the company’s stand and direction. A classical example is that of 2013, when the company consistently pursued basic tenets of growth and innovation in spite of the challenges it was facing in the global economy (Samsung, 2014). At the core of all this was their desire to achieve diversification in order to target emerging opportunities as well as possibilities. This was to be achieved through the application of innovation and transformative technologies.
True to the institutional shareholders’ influence on the managerial actions, the company recorded massive sales and profit which served to cement its global leadership in the electronics industry. This great leap was appreciated when the company’s share value consequently jumped to the benefit of every shareholder. A second influence by the institutional shareholders is seen in the company’s core business capabilities and expansive strategy. Owing to the company’s market leadership in 2014 at both fronts of mobile communications and television, the shareholders influenced major reforms in the memory chip business (Samsung, 2014). This saw managerial actions directed at improving cost savings and advancing the company’s process technology. As a result, Samsung Electronics was able to achieve record sales in the memory microchip business segment; this was due to the production of high-value as well as differentiated products, thereby achieving global response in terms of market share. A particularly interesting picture is the institutional shareholders’ influence on the company’s research and development (R&D) and design agenda. The institutions major influence on the outcome of these processes by seemingly having a take on who are going to be recruited and what is going to be restructured to fit the company’s objectives and goals. This is done so as to reinforce the company’s production processes and consequently its financial position. The latter acts to spur the growth of the company’s share resulting into increased profits to the shareholders (Samsung, 2014). By commanding influence on who ought to be recruited and the direction that should be pursued for efficient restructuring, the institutional shareholders seem to have a final word on the resources and capabilities of the company.
This influence is also evidenced in the company’s board of directors, which seems to be mainly streamlined or handpicked. First, three members of the board of directors are major shareholders. Two of these individual shareholders apparently hold the current CEO offices at the company. Further, five members of the board are independent directors; the remaining four being insiders. By appointing five independent members to the board of directors, the source of influence has a main purpose of introducing transparency and oversight role in the running of the company’s operations (Samsung, 2014). In any case, the institutional shareholders are mainly the affiliate parties to Samsung Electronics meaning that they have to protect the stock interests of their affiliate company. Additionally, the same affiliates have got investors or individual shareholders who invest in them by pooling together their collective investments. These shareholders need to be protected as well in any investment undertaking by these institutions. As such, they have to ensure that they command influence at the top levels of the company’s management.
Conclusion
As we have seen, institutional investors in a company greatly influence the company’s operations and production processes at almost every senior level. The influence is not seen to undermine the management or directorship of the company, but as a means of protecting the company’s share value and seeking new ways of boosting its growth. In this way, the institutional shareholders ensure that they get maximum profit as a result of share growth thereby passing the benefit to their investors. As such, it is almost likely to find such shareholder influence in every company that has got large institutional shareholders.
References
Samsung. (2014). SAMSUNG. Retrieved from http://www.samsung.com/us/aboutsamsung/investor_relations/financial_information/financial_statement.html
