Large conglomerates sharply expand stock-based pay for owners, executives

South Korea's major conglomerates sharply increased the use of stock-based compensation for their controlling shareholders, relatives and executives over the past year, with the number of such agreements surging more than 60 percent. Samsung drove much of the increase after converting executive incentives from cash to shares as part of a push to strengthen management accountability.

Meanwhile, circular shareholding chains linking affiliates fell to about 16 percent of last year's level, signaling an improvement in ownership structures.

The Korea Fair Trade Commission released its 2026 report on share ownership among designated large business groups on Thursday.

The survey covered 89 of the 102 business groups with assets of 5 trillion won ($3.65 billion) or more subject to public disclosure requirements this year — specifically those with an identified controlling shareholder. A total of 3,293 affiliated companies within those groups were analyzed.

Fifteen business groups used stock grant agreements. The total number of agreements covering controlling shareholders, their relatives and executives reached 585, up 232 from 353 the previous year — a 65.7 percent increase.

Samsung alone accounted for 317 newly signed agreements this year, all involving executives. According to the Fair Trade Commission, Samsung converted a large portion of executive cash incentives into stock-based compensation as part of its accountability drive.

Six business groups had controlling shareholders or their relatives serving as executives who were also included in stock compensation arrangements. Among them, Doosan, Amorepacific and Kyobo Life each included the controlling shareholder directly as a recipient.

At Hanwha, Woongjin and Eugene, agreements were made with second-generation heirs of the controlling families. Hanwha, the first major domestic conglomerate to adopt restricted stock units (RSU) as a compensation method, has continued to expand their use.

Under the Fair Trade Act's rules against self-dealing, 1,047 companies across 88 business groups are now subject to regulation — those in which the controlling family holds a stake of 20 percent or more, and subsidiaries in which such companies hold more than 50 percent. That represents 31.8 percent of all companies surveyed.

The number of regulated companies rose by 89 from last year, crossing the 1,000 mark for the first time, partly reflecting the designation of new business groups. Of the total, 431 companies are directly held at 20 percent or more by the controlling family, while 616 are subsidiaries in which those companies hold more than half the shares.

Circular shareholding chains remaining among designated large business groups plunged from 1,435 last year to 233 this year.

Circular and cross-shareholding arrangements can artificially inflate capital among affiliates without any actual injection of funds. They can also obscure the true ownership and control structure of a business group or be used to prop up struggling affiliates — areas the Fair Trade Commission monitors closely.

The commission said the improvement in ownership structures reflects companies' own efforts to unwind circular shareholdings.

Four business groups still have circular shareholding chains. Sajo accounts for the vast majority with 220, followed by QCP with 8, Hyundai Motor Company with 4 and BS with 1, for a combined total of 233. Taekwang Industrial and KG, which each had two circular shareholding chains as of last year, eliminated all of theirs this year.

The reduction at Sajo was particularly steep. When the group was first designated as a large business group last year, it had 1,426 circular shareholding chains; only 220 remain this year.

Cross-shareholding among domestic affiliates rose from 9 to 14 cases. However, six of those cross-shareholdings were held by newly designated business groups before their designation and are being counted for the first time. Excluding newly designated groups, cross-shareholding among existing groups actually fell from 9 to 8.

The average internal ownership ratio — shares held by the controlling shareholder and related parties — stood at 61.4 percent among business groups with an identified controlling shareholder, down 1 percentage point from last year.

The controlling family's direct stake averaged just 3.5 percent, while affiliates held 55.5 percent. Both figures declined from the previous year, yet the gap between the family's direct holdings and the group's overall internal ownership remained at around 58 percentage points.

The commission said the wide gap indicates that controlling families exercise influence over entire business groups through affiliate cross-holdings despite holding relatively small direct stakes. It added that clearer ownership and governance structures are needed, including through the sale of affiliate shares by controlling families.

Of the 89 business groups with an identified controlling shareholder, 87 had the controlling shareholder directly holding shares in affiliates. By group, Iljin Global had the highest controlling shareholder stake at 51.4 percent, followed by Daemyung Chemical at 26.4 percent, Booyoung at 23.1 percent, Amorepacific at 17.5 percent and DB at 16.8 percent.

Among second-generation heirs, Nexon topped the list at 65.1 percent, followed by Hankook & Company Group at 19.6 percent. Bando Holdings and Aekyung each stood at 12.1 percent.

A total of 425 companies across 87 business groups held treasury shares. Hybe and Toss had no affiliates holding any treasury shares.

The overall level of treasury share holdings among large conglomerates also declined. As shareholder and market scrutiny of treasury shares has intensified, the average holding ratio among affiliates of groups with a controlling shareholder fell 0.5 percentage point from last year to 1.9 percent.

By group, Mirae Asset had the highest treasury share ratio at 10.5 percent, followed by Kyobo Life at 8.5 percent, KCC at 7.5 percent and Booyoung at 5.9 percent.

Among listed companies in which the controlling family holds shares, SK Group had the highest treasury share ratio at 24.6 percent. Taekwang Industrial stood at 24.4 percent and Lotte Holdings at 23.6 percent.

The survey also identified investment chains running from overseas affiliates into domestic ones. Across 34 business groups, 115 foreign affiliates held direct or indirect stakes in 88 domestic affiliates.

Lotte had the most overseas affiliates involved in such chains at 22, followed by SK Group with 11, Hanwha with 8 and Naver with 7.

Fifty-seven overseas affiliates across 21 business groups were held at 20 percent or more by the controlling family. Of those, 10 overseas affiliates across 5 groups had direct or indirect investment links extending to domestic affiliates.

Some overseas affiliates were wholly owned by the controlling shareholder personally. Hyosung had the most at 7, and a total of 16 companies across 8 business groups fell into this category.