[The Editors' Verdict] Responsibility for Samsung Electronics' New Low Price

The management bears great responsibility for halted innovation
but has suffered judicial risks so far
If they undergo painful reform, all citizens will support them

55,900 won. This is the new low price recorded by Samsung Electronics on the 25th of last month. It still remains in the '50,000 won range,' closing at 57,300 won on November 6th. As the Samsung Electronics stock held by 4 million individual investors collapses, the 'Samsung crisis theory' has become the market's hot topic. How did this crisis manifest? Experts have poured out their diagnoses. The cause of the crisis, as explained by a 20-year veteran Samsung Electronics engineer, was painfully clear. When the reasons are gathered, the conclusion is that the crisis was ultimately caused by complacency without innovation and challenge. Great innovative companies must look to the future and take on challenges, innovating with insight ahead of their time. The 'complacent Samsung' brought the crisis upon itself and bears the greatest responsibility for the new low price.

Is the complacency of Samsung solely due to the incompetence of its management? We need to look into why Samsung's clock stopped. Excessive judicial risk causes companies to halt investments and invites crisis. Samsung, caught in the impeachment storm of the Park Geun-hye administration and hit by the fallout of the 'state manipulation' scandal, has been plagued by judicial risks for a long time. Chairman Lee Jae-yong has been to prison twice and has attended about 180 court hearings over the past eight years. The illegal succession of management rights case, in which he was acquitted in the first trial, was appealed by the prosecution and recently had another trial. Trials related to the Samsung Biologics accounting fraud case are also ongoing. The owner has been in and out of prison, and the management has been mentally consumed by trials for over eight years. During this period, the management was obsessed with not standing out, and conservatism deepened. Isn't this the result of Samsung being shaken recklessly?

Who is responsible for the judicial risk? It is a complex issue, but looking only at Samsung Biologics, there are many unfortunate aspects. The day before, the Financial Services Commission decided to lower the penalty level for Kakao Mobility's accounting standard violation charge by one step to 'gross negligence level 2' from the original proposal. It was judged that there was no intentional accounting fraud. Kakao Mobility's issue was whether to recognize revenue on a gross or net basis. This is an accounting issue where opinions may differ depending on perspective, as abstract accounting standards are applied to specific cases. Nevertheless, the Financial Supervisory Service applied the highest penalty standard, 'intentional level 1,' accusing them of 'intentionally' inflating sales. The final penalty is decided by the Securities and Futures Commission, which reportedly formed a consensus internally that they should not provoke a 'second Samsung Biologics incident.' Some in the industry interpreted this as considering that if the Securities and Futures Commission stigmatizes it as intentional accounting fraud, major shareholders such as global private equity firms might file administrative lawsuits.

The industry evaluates that Samsung Biologics was also an accounting issue about which accounting standards to apply between book value and market value, and whether it should be classified as a subsidiary or an affiliate. Yet, it is still on trial for accounting manipulation charges. The Samsung Biologics accounting investigation was also conducted at the request of supervisory authorities. Supervisory agencies should not be the source of disputes but should play a role in reducing the possibility of disputes to stabilize the market.

No one is free from responsibility in the debate over Samsung Electronics' new low price. This is not to give Samsung a free pass. Samsung was so preoccupied with the 'external' perspective that it failed to control 'internally,' stopped itself without innovation and challenge. The responsibility lies entirely with Samsung's top management. However, when compared to TSMC, the environment Samsung faces is bitterly ironic. TSMC's market capitalization is more than three times that of Samsung Electronics. This happened in less than a year. How is this possible? Taiwan's TSMC is supported by the nation with life-or-death determination. All Taiwanese people cheer for companies moving toward innovation.

Samsung's top management has announced three major reform measures and is preparing for high-intensity restructuring and personnel reshuffles. If they do not do it properly, they should realize that they may follow in Intel's footsteps. And they must no longer be held back by external variables. Samsung is a stock that embodies the people's hopes for a prosperous retirement. Samsung's return to leadership stocks has now entered a waiting period. It is time to move forward without wavering. For the sake of 4 million small shareholders and the nation's retirement.