Samsung and SK Hynix will cancel over $14 billion worth of treasury stock to promote corporate governance reform

To enhance corporate governance, Samsung Electronics and SK Group announced they will jointly cancel a total of 2.08 trillion Korean won (approximately $1.4 billion) in treasury shares. This move is one of the largest share buyback cancellations among Korean companies and marks a significant step in Korea’s efforts to reform corporate governance.

Both companies stated that the cancellation aims to improve shareholder returns and narrow the “Korean discount”—the valuation gap between Korean stocks and their global peers. This long-standing discount has been closely linked to governance issues in Korean firms and has become a focal point for global investors.

Samsung Electronics will cancel 87 million treasury shares, including preferred shares, in the first half of this year. Meanwhile, SK Group plans to cancel about 4.8 trillion Korean won of treasury shares, representing 20% of its outstanding shares. These actions align with Korea’s broader trend of corporate governance reform and respond to last year’s revision of the Commercial Act, which requires companies to cancel treasury shares to reduce their use as control mechanisms and instead focus on enhancing shareholder value.

The Korean stock market has performed strongly, with the Kospi index becoming one of the best-performing major indices globally, partly due to market expectations for governance reforms. The latest announcements from Samsung and SK are seen as important signals of progress in Korea’s corporate governance reform.

By reducing the number of outstanding shares, both companies aim to increase earnings per share and return on shareholders’ equity—key metrics closely watched by global investors. This reform not only complies with the newly amended Commercial Act but also reflects the companies’ intentions to boost shareholder value.

Investors have welcomed this reform. Recently, after Future Asset Life Insurance announced share buyback cancellation, its stock price rose by 30%, and SK Securities’ stock increased by 17% due to a stock consolidation.

As Korea enters the annual shareholder meeting season, expected to peak in March, this year’s meetings will test the effectiveness of the new corporate governance mechanisms. Institutional investors and proxy advisors will pay closer attention to board independence, shareholder return policies, and capital allocation, marking a major transformation in Korea’s corporate governance structure.

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