Note 7 crisis: Samsung faces revolt in home market

2016-10-24 13:39 - Hooyeon Kim
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Samsung is moving to recall its Note 7 amid reports of exploding devices. (Reuters)

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Seoul - Samsung Group, for decades the corporate champion of South Korea, is now facing a revolt at home.

On Monday, hundreds of owners of  Samsung Electronics’s fire-prone Galaxy Note 7 filed a class-action lawsuit demanding compensation.

Hours earlier, a South Korean investment advisory firm recommended shareholders vote against Vice Chairman Jay Y. Lee joining the board, in the strongest public opposition so far to the heir-apparent’s ascension.

The twin setbacks come as the phonemaker grapples with the most serious crisis in its 47-year history, the debacle surrounding the global recall of a phone that’s been documented overheating and bursting into flame.

That brouhaha has pierced the company’s aura of invulnerability at home, and could prompt greater scrutiny of a national champion that once could do no wrong.

“Samsung may have become a bit too conceited over the years. A lot has happened that would never have happened at Samsung in the past,” said Park Ju-gun, president of corporate watchdog CEOSCORE in Seoul.

“It has caused a crack in the company’s confidence. Samsung worked hard to build up a premium image, but its reputation has been fractured.”

More broadly, South Korea’s long-established chaebol system has drawn fire in recent years for sustaining family-run fiefdoms at the expense of shareholders.

Samsung, as the largest of the chaebols, has attracted criticism from activist investors including Paul Elliott Singer, who last year launched one of the country’s biggest proxy fights when he contested the merger of two key Samsung Group affiliates.

While that deal eventually went through, Singer is now pushing for more change at Samsung Electronics.

Sustinvest, a Seoul-based proxy-advisory firm, said in a letter to shareholders that Lee isn’t qualified to be on the board because he benefited from “inter-affiliate” transactions at the Samsung group.

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