As Samsung, Hyundai stocks plunge, so does money earmarked for society
Two of South Korea’s largest conglomerates, which promised to donate huge amounts of money to apologize for their alleged involvement in murky business practices, are facing an awkward situation as the prices of the stocks earmarked for the donation have plunged in recent months.
Samsung Electronics Co. and Hyundai Motor Co., the nation’s No. 1 and No. 2 family-run companies, or chaebol, pledged earlier this year to commit 800 billion won and 1 trillion won (800 million and 1 billion USD), respectively. The two companies have been under fire for alleged unorthodox transfers of wealth from father to son, among other business malfeasances.
Lee Kun-hee, chairman of Samsung Group, and his son Jay-yong, donated 79,720 shares and 121,170 shares in Samsung Electronics, whose value was estimated at a combined 131.2 billion won at the time. But the stock prices of the electronics giant has dropped in past months, brining down the estimated price to 110.3 billion won at market close on Wednesday.
Samsung Group said that it does not have obligation to compensate for any shortfall brought by the price plunge, saying that the shares are "not in their hands" anymore. "We fulfilled our promise to donate 800 billion won at the time, and there is no reason for us to compensate for the shortfall, since the money is not anymore in our hands," a Samsung official said. Hyundai Motor, the nation’s largest carmaker, is in an even more awkward position, as the price of stocks that it promised to donate for social development in April has plunged, as well, but Hyundai has yet to even donate them yet. On April 19, Hyundai Motor announced that it would donate 1 trillion won in contribution to society by selling its shares in the group’s logistics arm, Glovis Co. The move came as its Chairman Chung Mong-koo and other high-ranking officials were found to have been involved in the creation of illegal slush funds. Hyundai Motor and its sister company Kia Motors Corp. are under investigation for allegedly using the funds to bribe government officials. Mr. Chung was arrested last month on charges of embezzling company funds of more than 110 billion won. The company’s stock prices, however, have plunged nearly 50 percent since the announcement, prompting concerns of how the automaker would be able to keep its promise on the donation. The senior Mr. Chung and his son have promised to compensate for any shortfall due to share price cuts. Sources close to the matter said that the discussion on the social contribution has virtually ended within company walls. "With the company’s head under arrest, we are not in a position to deal with his private property to pay for the donation," a Hyundai official said. "But," the official assured, "we will still stick to the promise to donate 1 trillion won."
