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Samsung stung: EM managers on arrest of Korean giant's vice-chair

Samsung stung: EM managers on arrest of Korean giant's vice-chair

The vice-chairman of Samsung Electronics, Lee Jae-yong, was arrested for bribery in connection with South Korea’s corruption scandal on Friday, which has already seen the country’s President Park Geun-hye suspended.

The arrest of Jae-yong is the latest setback for the Korean electronics manufacturer, which was forced to scrap its Galaxy Note 7s smartphone last year after the newly-launched device became a fire risk.

This led to the technology firm’s share price falling 8% on 11 October alone, which marked the biggest percentage decline for the company since October 2008.

Citywire Selector asked leading emerging market managers for their views on the company and whether the country as a whole is effectively meeting ethical, social and corporate (ESG) standards.

Jeff Chowdhry, who manages the BMO Responsible Global Emerging markets fund with Sam Mahtani, said, while Samsung was growing in revenue terms, it lags other firms in implementing ESG efforts.

‘Korea is a good example where corporate governance improvements have been very slow, very laborious and in some cases non-existent. Samsung is company that continues to have corporate governance problems, continues to have issues about leadership and succession.

'Even though it is one of the biggest emerging market companies in the world, its corporate governance is not up to scratch,’ Chowdhry said.

Mike Sell, who manages the Alquity Future World fund with Roberto Lampl, said Samsung’s practices were in keeping with the country’s low standards of ESG.

'Of all the markets we look at in Asia, Korea is the worst for ESG by a mile. It is the most developed Asian market and it has the worst corporate governance.

'Environmental and social issues don't really factor in it. Some of the largest companies have senior management who have been indicted for bribery,’ Sell added.  

A longer article examining ESG standards in emerging markets will appear in the March issue of Citywire Selector.

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