[Chairman Lee Kun-hee Passes Away] Changes in Samsung's Governance... Massive Inheritance Tax Variable

Lee Kun-hee, Chairman of Samsung Electronics

[Asia Economy Reporter Changhwan Lee] With the passing of Samsung Electronics Chairman Lee Kun-hee on the 25th, interest has grown regarding potential changes in Samsung Group's governance structure.

Chairman Lee held 249,273,200 shares of Samsung Electronics (4.18% stake), 619,900 preferred shares of Samsung Electronics (0.08%), 9,701 shares of Samsung SDS (0.01%), 5,425,733 shares of Samsung C&T Corporation (2.86%), and 41,519,180 shares of Samsung Life Insurance (20.76%), among others.

Given that Samsung Electronics' current market capitalization reaches 360 trillion KRW, the value of Chairman Lee's shares alone amounts to 15 trillion KRW. Analysts estimate that if Vice Chairman Lee Jae-yong and family members inherit the Samsung affiliate stocks held by Chairman Lee, the tax burden could exceed 10 trillion KRW.

There is also significant attention on the restructuring of the governance. Currently, the management rights of Samsung Electronics follow the structure: Vice Chairman Lee Jae-yong → Samsung C&T Corporation → Samsung Life Insurance → Samsung Electronics.

Vice Chairman Lee controls the group with a 17.48% stake in Samsung C&T Corporation. Depending on the future of Chairman Lee's over 20% stake in Samsung Life Insurance, Vice Chairman Lee's governance structure could become more solidified.

A variable factor is the so-called Samsung Life Insurance Act (amendment to the Insurance Business Act) being pushed by the government and ruling party. If this bill passes the National Assembly, Samsung Life Insurance and Samsung Fire & Marine Insurance will have to evaluate their Samsung Electronics stock holdings at market value and dispose of any amount exceeding 3% of total assets within the legal deadline.

Meanwhile, in a public apology in May addressing suspicions over management succession and labor union issues, Vice Chairman Lee stated, "I will ensure that no further controversy arises over management succession," and added, "I do not intend to pass the company’s management rights on to my children."