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Samsung Electronics tightens donation rules; report says two group executives offer to quit

By Se Young Lee

SEOUL (Reuters) - Tech giant Samsung Electronics <005930.KS> is tightening board oversight on donations while two senior Samsung Group [SAGR.UL] executives reportedly offered to resign, as the conglomerate struggles with the fallout from a graft scandal that led to its leader's arrest.

Samsung Electronics said on Friday its board of directors will now vote on any financial support to third parties worth 1 billion won ($886,210.56) or more and disclose any such payments publicly. Previously, only payments of 680 billion won or more were subject to board approval.

"This move improves transparency in financial aid and appropriation of social corporate social responsibility funds, and strengthens compliance management," the company said in a statement.

The flagship of South Korea's top conglomerate Samsung Group has been at the center of an influence-peddling scandal that led South Korea's parliament to impeach President Park Geun-hye in December.

Jay Y. Lee, leader of Samsung Group and Samsung Electronics' vice chairman, was arrested last week after being named a suspect by the South Korean special prosecutor's office. Lee is accused of pledging 43 billion won in bribes to a company and organizations backed by President Park Geun-hye's confidant, Choi Soon-sil, to curry favor.

Though Samsung Group and Lee have denied paying bribes to Park or seeking improper favors, the conglomerate has pledged to take steps to improve transparency amid accusations and criticisms that Samsung used its financial might to game the system in its favor.

Lee, who is arguing that he was coerced into making the payments, told lawmakers during a December hearing that Samsung Group would take measures to avoid making improper payments in the future.

"It appears that the things that Vice Chairman Lee promised to do are being carried out now," said Park Ju-gun, head of corporate analysis firm CEO Score.

Samsung also said on Friday it was unable to nominate a new outside director for vote at the March 24 annual shareholder meeting due to uncertain circumstances. The firm had in November promised to nominate at least one new board member with "global C-suite experience" as part of its efforts to improve corporate governance.

MANAGEMENT UPHEAVAL?

Separately, South Korea's Yonhap news agency reported later on Friday that Samsung Group Vice Chairman Choi Gee-sung and President Chang Choong-ki have offered to resign to take responsibility for the graft scandal. Choi and Chang are also suspects in the special prosecutor's investigation.

Samsung Group had no immediate comment to offer on the report when contacted by Reuters.

A potential exit by Choi adds to questions about how the smartphones-to-biopharmaceuticals giant will operate in Lee's absence.

Samsung insiders and former executives believed that after Lee's arrest Choi, the No.2 at Samsung Group and mentor to the 48-year-old Lee, would likely manage group-level affairs while professional managers continue running the various affiliates.

Choi's exit, if confirmed, would signal a change of guard and raise the possibility that heads of the various affiliates are given more autonomy to make business decisions, analysts said on Friday.

"I suspect there will be major changes at the CEO level going forward," said Chung Sun-sup, head of corporate analysis firm Chaebul.com.

Samsung shares ended down 2.5 percent on Friday, but are still up 6 percent so far this year.

(Reporting by Se Young Lee; additional reporting by Joyce Lee; Editing by Stephen Coates and Muralikumar Anantharaman)

 

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