A new disclosure rule taking effect with this year's half-year reports requires companies to report executive pay alongside performance measures such as total shareholder return (TSR) and operating profit, making it possible for the first time to compare each company's "shareholder report card" against its executive compensation at a glance. Among the 10 companies with the largest market capitalization, Samsung Electro-Mechanics (009150.KS) recorded the highest TSR at 754.8%, while Samsung Biologics (207940.KS) posted the lowest at -17.9%. In a number of cases, executive pay and shareholder returns moved in opposite directions.
Among the 10 largest companies by market value, Samsung Electro-Mechanics posted the highest TSR for the period at 754.8%, according to the Financial Supervisory Service's electronic disclosure system on the 21st. That was up 646.9 percentage points from 107.9% in the previous quarter. Unlike a simple share-price return, which reflects only how much a stock has risen, TSR includes dividends paid to shareholders, showing how much value a company has delivered to its investors.
Samsung Electro-Mechanics, which posted the highest TSR, also saw its share price surge 756.47% in the first half, from 255,000 won to 2.184 million won. SK Square similarly saw its share price rise 361.14% over the same period, moving in line with its TSR of 361.6%. By contrast, Samsung Biologics, which had the lowest TSR, saw its share price fall 17.94%, from 1.695 million won to 1.391 million won.
Among the 10 largest companies by market value, SK Square (402340.KS) had the second-highest TSR after Samsung Electro-Mechanics at 361.6%. It was followed by SK hynix (000660.KS) at 292%, Samsung Electronics (005930.KS) at 179%, Samsung Life Insurance (032830.KS) at 154.4%, Samsung C&T (028260.KS) at 95.6% and Hyundai Motor (005380.KS) at 68.6%. LG Energy Solution (373220.KS) and Samsung Biologics recorded negative figures of -1.8% and -17.9%, respectively. Hanwha Aerospace (012450.KS) did not report a TSR for the period because its dividend per share had not been finalized.
Earlier, as a follow-up to the "Corporate Disclosure Improvement Plan" announced last November, financial authorities required companies to disclose the pay of directors and auditors alongside performance measures such as operating profit and TSR over the past three years. December fiscal-year companies applied the revised format starting with half-year reports prepared as of the end of June this year, marking the first disclosure of TSR.
The first report cards also revealed cases where executive pay and TSR diverged. Samsung Electro-Mechanics saw its TSR jump from 107.9% to 754.8%, yet average pay per director fell 60.3%, from 1.096 billion won to 435 million won. Samsung Electronics likewise saw its TSR rise from 129% to 179%, while average pay dropped from 8.302 billion won to 3.142 billion won. Conversely, SK hynix saw its TSR rise from 282% to 292%, while average pay increased 423%, from 3.145 billion won to 16.45 billion won.
Beyond the 10 largest companies, the gap was even more striking in some cases. Kakao (035720.KS) saw its TSR fall 87 percentage points, from 57.5% to -29.5%. While average pay for all directors fell, the first-half compensation of Chief Executive Chung Shin-a rose 29.6% to 1.209 billion won, from 933 million won a year earlier. Executive bonuses, however, are sometimes paid the following year based on an assessment of the prior fiscal year's performance, so even when pay and TSR for the same period are disclosed side by side, the actual timing of the performance assessment may differ.
In the second half, TSR figures could rise further as large-cap chipmakers lead an expansion of shareholder returns. Lee Jae-won, an analyst at Yuanta Securities, said share buybacks and cancellations do not merely improve short-term supply and demand but can lead to higher earnings per share (EPS) as the number of outstanding shares falls, as well as improved return on equity (ROE) as equity is reduced. He added that if repeated shareholder returns raise capital efficiency, this could serve as a factor in a valuation re-rating and in easing the "Korea discount."
