CEOs jumping on stock buyback

By Kang Seung-woo

Cho Ju-no, CEO of LG Electronics’ mobile business

Othman Al-Ghamdi, CEO of S-Oil

Chief executives of the nation’s major business groups are beginning to purchase shares in their own companies. Market watchers point out that such moves are intended to ensure responsible management and show confidence in growth potential of their firms.

Cho Ju-no, CEO of LG Electronics’ mobile business, purchased 2,000 stocks worth 117 million won ($101,790) last week and now owns 4,637 shares of the Seoul-based tech behemoth.

“The stock purchase signals the CEO’s determination to make its new smartphone a success and at the same time his confidence in the new device,” an LG officialsaid.

LG is scheduled to unveil its G6 flagship phone on Feb. 26 at the annual mobile show in Spain and Cho’s future as captain of the smartphone division is likely to depend on how the handset will fare. Cho took office in December 2014.

Under his leadership, LG launched two previous smartphones the G4 and G5, but failed to boost its presence in the world market where the duopoly of Samsung Electronics and Apple has continued for the last few years.

As a result, the firm’s mobile communications sector recorded seven consecutive quarters of operational losses by the end of last year.

Along with the LG CEO, S-Oil CEO Othman Al-Ghamdi also bought 1,159 company shares worth 94 million won, according to the nation’s third-largest oil refiner.

Watchers point out that it carries more weight because Al-Ghamdi is the first incumbent CEO of S-Oil to buy back shares.

Former CEO Samir Al-Tubayyeb, who was in office between September 2005 and April 2008, bought the company’s shares when returning to Saudi Aramco, the top shareholder of S-Oil.

Saudi Aramco, a Saudi Arabian state oil and natural gas company, is the largest shareholder in the Seoul-based refinery with a 63.4 percent stake.

“The CEO purchased the shares out of his own pocket,” said an S-Oil official. “It reflects on his confidence in the company’s growth potential through large-scale projects.”

S-Oil is currently investing 4.8 trillion won to build a residue upgrading complex and an olefin downstream complex in Ulsan by 2018 with expectations they will increase its profitability.

The oil refiner’s operating profit for 2016 more than doubled to a record 1.69 trillion won from 817 billion won a year earlier.

“Stock buybacks by CEOs are a positive sign toward boosting corporate credibility,” said Sung Tae-yoon, an economics professor at Yonsei University. “It shows the CEO’s intention for responsible management and confidence in the firms.”