Questions Linger Regarding Samsung’s Management Control

With Samsung Group’s dramatic management reform plan released yesterday, the issue of transferring management control does not seem to be a focus of controversy for the moment.

This is because Samsung Chairman Lee Kun-hee resigned and his son, Samsung Electronics Chief Customer Officer Lee Jae-yong, also decided to step down from his post. He will be transferred to an overseas office with humble working conditions to gain field experience and pioneer new markets abroad.

Samsung’s Strategic Planning Office Director Lee Hak-soo said in a Q&A session held on the same day that, “Lee Jae-yong is still receiving management training. The chairman hasn’t made a decision on transferring the group’s management control to his son.”

This suggests that the management control transfer issue could become a mid- to long-term issue.

However, the prevailing view of observers, both inside and outside of the group, is that the chairman just does not intend to transfer control in the near term but that Lee Jae-yong is still the strongest candidate.

Such a view emerges because Lee Jae-yong has as much as a 25.1% stake in Samsung Everland, a key link in the group’s stakeholder structure, and because allegations related to the transfer of management control were for the most part cleared in the recent special investigation.

Lee Hak-soo said, “Chairman Lee Kun-hee believes that some unhappy incidents would take place if his son took over management control without the support of shareholders, employees and society.”

A Samsung executive said, “If you look at it another way, the chairman is demanding his son gain approval and support on his own.” In this regard, some believe that the father sacrificed himself and stepped back to help his son stand on his own feet.

They say that whether Lee Jae-yong takes over management control and when will depend on what ability he can demonstrate. Reportedly, he will accumulate management experience in the emerging markets, including China, India, Latin America, the Middle East and Africa.

An executive at a Samsung affiliate said, “Lee Jae-yong’s activities from now will serve as an indicator of his management ability. But they will not be unrelated to Samsung’s strategic direction for the future.”

In particular, the decision to send him to an overseas office is intended to develop him into a “capable global leader,” rather than waste his time with all kinds of distractions in Korea.

The 40-year-old son of the Samsung chairman joined Samsung Electronics in 1991 after graduating from Gyeongbok High School and Seoul National University as an Asian history major. He later earned an MBA from Keio University in Japan and attended a doctorate course at Harvard Business School.

When he returned to Samsung Electronics as assistant managing director in 2001, he began full-scale management training. Promoted to managing director and appointed as chief customer officer in January 2007, he accelerated his management activities to a global level.

Upon being notified of his “resignation” and transfer to an overseas office, Lee reportedly accepted it without any complaints, just saying, “Okay, I got it.”

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