Samsung in crisis amid the absence of chairman

Samsung Group is in a serious mood ahead of Samsung Electronics’ earnings report for the third quarter, which is scheduled for Tuesday. The operating profit estimate for the third quarter plunged to 5.5 trillion won (5.18 billion U.S. dollars) in late last month from 7 trillion won (6.6 billion dollars) in late August. Watchers recently say that the quarterly operating profit may even have fallen to around 4 trillion won. The actual figure will only be revealed in three days when earnings are reported, but a slump in operational performance that would be shocking is widely considered inevitable.

Samsung Electronics’ second-quarter operating profit came to 7.19 trillion (6.78 billion dollars), the lowest level in two years. Up until then, the electronics giant cautiously predicted, “Business performance will improve in the second half.” As situation is getting worse over time, however, rumors have it that the company could conduct mass personnel reshuffle to discipline those responsible and implement restructuring to lay off employees. As some news reports even suggested that Samsung Electronics will sharply reduce the recruitment of college graduates in this year’s second half, Lee Jun, Samsung`s chief communications officer, tried to contain negative publicity, saying on Wednesday, “There will be no notable change to the size of recruitment in the second half.”

Accidently, the timing of the crisis coincides with the duration of absence of Chairman Lee Kun-hee, who has been recovering from heart disease at hospital for a period of five months. It is uncertain whether Samsung would have been able to prevent negative developments such as the deterioration of Samsung Electronics smartphones’ international competiveness and China’s strides in information technology, even if Chairman Lee remained healthy. However, as the crisis at Samsung, which was always been enjoying the prevailing image of a market leader, coincides with the variable of Chairman Lee’s absence, Vice Chairman Lee Jae-yong who is in charge of management on behalf of the senior Lee would feel even bigger burden.

As Chairman Lee’s health has improved somewhat, Samsung is considering moving him from hospital to his residence, so that he can receive treatment at home. However, the prevailing view is that even if he is discharged from hospital, he will not be able to return to management for a considerable period of time. Prompt recovery of Chairman Lee, who successfully enabled his company to remain atop in the market, something that is deemed as difficult as successful launch of a new undertaking, and to take a leap forward, is desirable not only to the Samsung family but also the Korean economy that is on a shaky ground. In times like this, Vice Chairman Lee Jae-yong, the next-generation leader of Korea’s top conglomerate, should renew his commitment and display leadership to help his company overcome the crisis. In Korea there are forces who strive to criticize and sway conglomerates such as Samsung, Hyundai Motor, SK and LG, but if conglomerates lose ground, it is none other than the Korean people that stand to take the brunt of damage.