Samsung Electronics has decided to pay executive performance bonuses in company stock this year to strengthen responsible management. This is aimed at clarifying executives' work objectives and enhancing responsibility. However, to manage stock prices, the number of stocks issued will be reduced if Samsung Electronics' stock price falls one year later.
According to the industry on the 17th, Samsung Electronics announced in an internal notice that it has decided to pay a portion of this year's Excess Profit Incentive (OPI) to executives in company stock. Senior executives must choose more than 50% of their performance bonus in stock, vice presidents must choose more than 70%, presidents must choose more than 80%, and registered executives must select 100%.
This stock will be distributed one year later, in January 2026, and stocks received cannot be sold for one year for vice presidents and below, and for two years for the president group from the payment date. Based on the payment agreement date, senior executives and vice presidents will be restricted from selling for two years, while the president group will face a three-year restriction. If the stock price one year later (as of January 2026) is the same as or increases from the time of the agreement, they will receive the agreed quantity. However, if the stock price decreases, the number of shares received will be reduced by the percentage of the decrease. For instance, if the stock price falls by 10% one year later, they will only receive 90% of the agreed stock quantity.
The OPI will pay up to 50% of an individual's annual salary within the 20% limit of the excess profit when the performance of the affiliated institutional sector exceeds the targets set at the beginning of the year. This will be provided at the beginning of the following year after evaluating the annual performance. This year, the OPI for the device solutions (DS) institutional sector, which handles Samsung Electronics' semiconductor business, is set at 12% to 16%. The expected OPI payout rate for the mobile experience (MX) institutional sector is 40% to 44%, and for the video display (VD) institutional sector responsible for TV business, it is set at 22% to 27%. The home appliances (DA) institutional sector, which performed poorly, as well as the network and medical equipment institutional sectors, are at around 7% to 9%. The actual OPI payout scale will be finalized and announced on the payment day, scheduled for the 24th.
Samsung Electronics linking executive performance bonuses directly to stock prices is interpreted as an intention to strengthen stock price management in addition to operational profitability and other management performance indicators. This move by Samsung Electronics is expected to lead to an increase in corporate value and stock prices.
Starting next year, Samsung Electronics plans to consider applying such excess profit incentive stock compensation systems to general employees as well. In the case of introducing a stock compensation system for employees, the selection of stock options is expected to be optional rather than mandatory. Samsung Electronics noted that they do not plan to consider stock quantity deductions due to stock price declines for employees.