Post Lee Kun-hee structure at Samsung?

(Photo : AP/NEWSis)

How shall Samsung business group overcome the shock of Lee Kun-hee’s heart attack? Lee has been leading the Samsung group with his charismatic leadership until now. He has pushed the ‘Mach’ management and he has been the real leader of the group in every aspect of the conglomerate.

However, his over-the-weekend heart attack raised anew whether the Samsung could proceed with his leadership over the group. Currently, market insiders began to speculate what the picture of post-Lee Kun-hee era might be.

Samsung Electronics vice chairman Lee Jae-yong(Photo : NEWSis)

Shall Lee Jae-yong be center of Post-Lee Kun-hee era?

Market insiders’ speculation about the potential changes in the governance structure and succession by Lee’s children is rife in time with Lee’s heart attack, because his health issue appears to be more serious than before. Samsung executives deny the seriousness of this issue, and they say that he will get well very soon and return to management as before.

The governance structure is organized such that the holding company Samsung Everland rules over Samsung Life, and Samsung Life rules over Samsung Electronics, respectively. In terms of possession of stocks of Samsung Everland, Lee’s son Jae-yong, vice-chairman, possesses 25.1%, Lee Boo-jin, daughter and president of Hotel Shilla, owns 8.4%, and Lee Seo-hyun, another daughter and president of fashion department of Samsung Everland, owns 8.4%. These three children of Lee began to possess the shares in 1998, and Lee Kun-hee has only 3.7%.

In this vein, succession process has already proceeded to a substantial extent, and it was already centered around Lee Jae-yong in 1998. The succession process is almost finished in some respect. However, detailed sectors to be allocated for Jae-yong’s three children are not yet announced. One of the insiders said that there would not occur disorder or large-scale alteration at the Samsung.

In which direction shall the realignment of the group go?

Until recently, the Samsung has been proceeding with its realignment of companies : simplification and serialization of chain companies. It is convincingly predicted that the simplification of chain firms will speed up.

The Samsung had already declared that it will rid itself of the circular investment by 2016 and will reorganize the group into three groups such as Samsung Life, Samsung Electronics, and Samsung Trade. Market observers say that this scheme will get speedier, considering Lee’s worsening health.

Recently, the Samsung has determined that it will make Samsung SDI public, that Samsung Life will incorporate Samsung Asset Management, and that Samsung Insurance will incorporate Samsung Futures, and so forth. Already, Samsung decided to merge SDI and Jeil Furriery and place it under Samsung Electronics. Samsung Trade has Samsung Comprehensive Chemicals and Samsung PetroChemical under its umbrella. This series of vertical incorporation will continue faster.

Mid- to long-term strategy to be affected?

Although, many of Samsung executives say that there will not occur big problems in the post-Lee Kun-hee era, it is predictable that there alreay exist several variants, which might change the Samsung in mid- to long-term strategy. Lee Kun-hee’s strategy of Mach management may need some minute re-arrangment.

Mach management means that “in order to implement changes to suit the mach speed(340m per second) by the fighter-planes, all things such as parts, engines, and materials must change.” This was purported to bring about unprecedented changes in business to adjust to a new era and for Samsung to become a super-first-rate business.

This new plan was to find out “new food” for future after the smartphone era. It has become an urgent task for Samsung to make non-electronics chain companies be super-first-rate now. How shall this project proceed is a question that many watchers hope to find answers to.

Popular expectations imposed on Samsung to be more transparent

The Samsung conglomerate is a global player, representing the most-famous Korean company. Samsung’s business movement could be interpreted to be maximization of productivity by way of governance re-organization as well as part of wealth-inheritance scheme to Lee’s third generation.

If the reorganization project proceeds purely for the improvement of management, it should be welcomed. However, if it part of its effort to cover up the controversial inheritance plan, it needs to be remedied.

Seeing that the Samsung profits occupy more than the total of other ten large companies, its influence over the whole of Korean economy is immense. Therefore, its governance reorganization and inheritance scheme should be a matter of concern for Koreans as well as people all over the world. In this sense, the Samsung group should give a more transparent explanation as to its management strategy as well as inheritance plan.

Samsung Electronics Chairman Lee Kun-hee(Photo : NEWSis)

Investors still buying rising Samsung stocks

Health concerns about Lee Kun-hee were not a major consideration for investors in their decisions to buy Samsung shares on Monday, May 12. Shares in Samsung Electronics and other Samsung affiliates rose Monday despite the group owner’s heart attack over the weekend.

A market analyst said, “Investors are not taking seriously the potential impact of Lee Kun-hee’ health problems, due to his reduced role in operations.” Such expectations pushed up most of the Samsung group stocks, outperforming the broader KOSPI gains.

On Moday, Samsung group said that Lee Kun-hee is recovering and may “regain consciousness” on Tuesday. Lee remains reportedly unconscious. According to Samsung sources, vice chairman Lee Jae-yong on Moday checked the group’s pending issues. Jae-yong had a luncheon meeting with executives and discussed important matters.