Samsung Shareholders Advised to Block Jay Y. Lee’s Nomination

(Bloomberg) -- A South Korean investment advisory firm is recommending shareholders of Samsung Electronics Co. vote against the nomination of Vice Chairman Jay Y. Lee to the company’s board of directors, in what may be the first opposition to the heir-apparent’s ascension.

Sustinvest Inc., a Seoul-based proxy-advisory firm, said in a letter to shareholders that Lee isn’t qualified to be on the board because he benefited from “inter-affiliate” transactions at the Samsung group. Such transactions are common among South Korea’s conglomerates but have come under increasing scrutiny because they are viewed as profiting insiders.

Lee, 48, who is expected to succeed his hospitalized father and chairman Lee Kun-hee, was nominated to the board in September. Samsung shareholders are scheduled to vote on the nomination at Thursday’s meeting.

Sustinvest, which recommended against last year’s merger of Samsung C&T and Cheil Industries, said in the letter that Lee has been a “beneficiary” of inter-affiliate transactions, which “undermine corporate value because they exclude the possibility of better deals.”

A Samsung spokesperson couldn’t be immediately reached for comment.

The opposition to Lee’s board nomination comes as the National Pension Service, Samsung Electronics’ biggest shareholder, said the country’s largest pension fund would vote for Lee’s directorship.

Thursday’s shareholders’ meeting also comes after Samsung’s decision to scrap the production and sale of its Galaxy Note 7 smartphone following reports that the devices were heating up and catching on fire.

To contact the reporter on this story: Hooyeon Kim in Seoul at hkim592@bloomberg.net. To contact the editors responsible for this story: Peter Pae at ppae1@bloomberg.net, Reed Stevenson

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