Prof.

Florencio Lopez-de-Silanes Case: Samsung Electronics

1. What are the benefits and disadvantages of the Korean chaebol structure? In
particular what governance issues can arise due to this structure?

2. Analyze the capital structure of Samsung Electronics. Compare it with the capital
structure of a company in the similar line of business (primarily manufacture of
chips) from another developed country and comment on the differences.

3. If Samsung Motors makes an after tax profit of USD100 million, what share of that
would go to the Lee family (owners)? What percentage of Samsung Motors do they
directly own? (Note: You do not have to provide the exact number. A good
approximation will be adequate.)

4. The client wants to recommend governance changes with special emphasis on the
board of directors. Evaluate the current board of Samsung Electronics. What are the
strengths and weaknesses in the current board composition? How many directors can
be classified as non-executive? How many can be classified as independent? What are
your criteria’s for assessing director independence? Do you think changes need to be
made to the current board composition? If no - why not, if yes - what changes would
you recommend?

5. Based on the company’s financials as of December 31, 1997 and publicly available
information, investigate the allegations made by Dr. Jang. Do you think the
convertible bond issue was a self-dealing transaction? How would you prove that
claim? What evidence do you have on you claim? (Note: you are not expected to do a
DCF.)

6. Does the agreement with the Pan-Pacific Industrial Investment resemble a simple
direct investment or something else? Why was the guarantee clause included in the
contract? Does it change the instrument? If you were on the Audit committee of the
company what questions would you ask about this transaction?

1
Prof. Florencio Lopez-de-Silanes Case: Samsung Electronics

7. The client wants to know the main corporate governance changes that Samsung
Electronics has undergone since the series of scandals a decade ago. Can you point to
the main 5 changes you can detect, and explain why you think they are the most
important and have the highest impact for minority shareholders?

8. The client also wants to know the implications for minority shareholders of Samsung
Electronics of the restructuring of the group and the potential listing of Samsung SDS
and Cheil Industries (formally Samsung Everland).
a. Can you think of two benefits and two potential problems of their decisions?
b. Unlike other group companies, Cheil Industries is controlled directly by the
Lee children and a family foundation. So, do you think the listing of Cheil Industries
bring any additional benefits to minority shareholders?