Samsung Electronics shareholder group holding a rally in front of Chairman Lee Kun-hee's residence [Seoul=Yonhap News]A Samsung Electronics shareholder group, the 'Shareholder Movement Headquarters of Korea', declared on the 21st that the provisional agreement reached between Samsung Electronics' management and labor on wage negotiations is illegal and announced legal action.

The shareholder group held a rally near Chairman Lee Kun-hee's residence on the morning of the 21st, stating, "The provisional agreement between management and labor, which pre-calculates 12% of pre-tax operating profit and links it to performance bonuses, is illegal." They asserted, "It is legally null and void unless it goes through the shareholder resolution process."

According to the provisional agreement, management and labor agreed to pay performance bonuses separately for OPI (Opportunity Performance Incentive) and the Semiconductor (DS) division as a special management performance bonus.

The shareholder group explained, "Even if the payment timing is after tax, the nature of the illegality remains the same as long as the basis for calculating the bonus pool, which combines OPI at 1.5% and special management performance bonus at 10.5%, totaling about 12% of operating profit, is a certain percentage of pre-tax operating profit."

They also stated that if a board resolution to ratify and execute the provisional agreement is put forward, they will file a lawsuit for nullification and an injunction.

Furthermore, they announced that they would file a representative lawsuit for damages against all directors who voted in favor of the provisional agreement, citing a breach of their duty of loyalty under the Commercial Act.

The argument is that the duty of loyalty for directors under the Commercial Act, which stipulates that they must faithfully perform their duties not only for the company but also for the shareholders, has potential illegality.

The group also stated that they plan to file an injunction to suspend the effect of the collective agreement, which omitted the shareholder resolution process, and a lawsuit for confirmation of nullity, as well as a lawsuit for damages against those who participated in the illegal strike.

Samsung Electronics Wage Negotiation Provisional Agreement [Suwon=Yonhap News]

The reasons for illegality put forth by the shareholder group are broadly three-fold.

First, they emphasized that operating profit is subject to distribution only after the deduction of corporate taxes and other taxes. Calculating performance bonuses before tax collection is seen as circumventing the state's tax authority.

Furthermore, they argued that even at the after-tax profit stage, funds cannot be withdrawn from the company without going through the 'procedure for calculating distributable profits' stipulated in Article 462, Paragraph 1 of the Commercial Act.

They also argued that the right to distribute the calculated distributable profits belongs to the shareholders who have invested by bearing risks and losses. In other words, performance bonuses should be calculated through a shareholder resolution.

They also cited President Lee Jae-myung's remarks at a State Council meeting on the 20th, stating, "It is something that even investors cannot do to institutionally share a certain percentage of operating profit before taxes are even deducted," as a basis for illegality.

They also announced their intention to mobilize shareholders of Samsung Electronics, which has '5 million national shareholders'.

They said, "Starting today, the Shareholder Movement Headquarters and all Samsung Electronics shareholders will immediately begin nationwide shareholder mobilization."

They plan to send shareholder letters by inspecting the shareholder registry and mobilize a group of plaintiffs targeting the entire nation through the group's Naver cafe and the shareholder action platform 'Act'. They also stated that litigation costs will be raised through shareholder contributions.

The shareholder group also took aim at the labor union once again.

They stated, "The strike announced for today has only been postponed until June 7th, but the threat of illegality is ongoing." They demanded that the union withdraw its strike notice and publicly declare that they will not re-enter a strike if the board resolution is rejected.

Furthermore, they asserted that other labor unions demanding performance bonuses based on pre-tax operating profit are making the same illegal claims. "Those labor unions that make such claims will face us, the Shareholder Movement Headquarters," they warned.

Another shareholder group, the 'Samsung Electronics Shareholder Action Implementation Headquarters', also held a rally nearby on the morning of the 21st.

They criticized the labor union, stating, "The problem is that they have taken the semiconductor industry, whose delivery dates are critical, hostage for the national economy," and "This has already provided significant indirect benefits to our semiconductor competitors."

They then argued, "If the affirmative vote is rejected and a destructive strike is pushed through, the government should immediately invoke emergency mediation rights."

They also requested, "We hope that the political sphere will immediately create legislation that can restrict such strikes, even if only on a limited basis."

Press conference urging the invocation of emergency mediation rights for Samsung Electronics [Seoul=Yonhap News]