Samsung Electronics was placed on the Group observation list* in January 2019. SKAGEN had already been in dialogue with Samsung over a longer period to address various ESG-related issues. Dialogue with Samsung at Group level was initiated in October 2018 to address the controversies that led to the company being placed on the observation list.
As an active owner, we have been in dialogue with Samsung on several occasions with the aim of improving corporate governance, stressing our expectation of compliance with international laws and promoting good structures to prevent new breaches from occurring.
The first stage of the engagement was largely shaped by external forces. This involved international investors - including SKAGEN and Storebrand Asset Management – the South Korean government and judiciary as well as NGOs urging Samsung to change their corporate governance practices. Over time, however, we have witnessed a noticeable change in Samsung's own attitude to ESG issues. This is arguably what has enabled the credible strengthening of routines, policies and corporate governance mechanisms.
Following close monitoring and regular engagement, dialogue, and cooperation, we have seen Samsung improve against almost all our predefined criteria to resolve the controversies over the past 18 months. It is for this reason that the company has been removed from the observation list and is now fully included in the Group's investment universe.
Jan Erik Saugestad, CEO of Storebrand Asset Management commented:
"It is gratifying to see that by combining Storebrand's 25 years of experience within sustainable investing with SKAGEN’s aptitude in active ownership we have gained a stronger voice in dialogue with our portfolio companies and achieved such a good result. As we see Samsung starting to understand the value of ESG to enhance the company's ability to attract international investors and live up to their expectations, we are positive about future developments in this area."
Alexandra Morris, Investment Director of SKAGEN commented:
"This is a good example of active ownership in practice. Although the conversations we have had with Samsung have been direct and sometimes challenging, we have built upon years of cooperation with and underlying trust in the company to turn a negative situation around."
* The Storebrand Group observation list consists of companies that are not excluded from our investment universe, but where we have reason to believe they may be in breach of our sustainability criteria, and purchase restrictions are placed on them. We work with these companies in a targeted manner to encourage them to make positive change within a pre-defined period or risk exclusion.