[Independence Day Pardon] Lee Jae-yong Freed from Shackles, Possible Promotion to 'Chairman' Within the Year

Possible When Decision Made by Internal Management, Not by Law

Vice Chairman Lee Jae-yong of Samsung Electronics, who was reinstated through the special pardon on August 15 Liberation Day, is moving at the Seoul Central District Court in Seocho-gu, Seoul on the 12th. Photo by Kang Jin-hyung aymsdream@

[Asia Economy Reporter Moon Chaeseok] With Samsung Electronics Vice Chairman Lee Jae-yong being reinstated through a special pardon on August 15, there is growing interest in the business community about whether he can assume the position of 'Chairman' within this year. The consensus is that the possibility of his promotion to chairman is high.

On this day, the government announced that it would reinstate Samsung Electronics Vice Chairman Lee Jae-yong, who recently completed his prison term, in commemoration of Liberation Day. According to the legal community, Lee was sentenced to 2 years and 6 months in prison in January last year for the political scandal case and was released on parole during the Liberation Day celebration in August last year.

Including the initial detention period at Seoul Detention Center, he completed his sentence at the end of last month but was still restricted by the Act on the Aggravated Punishment of Specific Economic Crimes, which limits employment for five years. Without government permission, he could not properly travel abroad. With the completion of his sentence and the special pardon, he is now free from the employment restriction regulation that was supposed to apply until 2027. This means he can engage in proper management activities.

There is high interest in maintaining the 'semiconductor super-gap' and pioneering future growth engines from a business perspective. In particular, attention is focused on the government's Chip4 (Chip4: Korea, United States, Japan, Taiwan) membership and Samsung's response. While joining would allow benefits such as access to U.S. equipment and subsidies, it could also deal a direct blow with reduced investment in Chinese memory semiconductor facilities and declining performance.

Focus is also on whether and how quickly mergers and acquisitions (M&A) related to future new businesses such as semiconductors, bio, artificial intelligence (AI), and next-generation communications will be pursued.

There is also a possibility of rebuilding Samsung’s control tower, currently at the task force (TF) level, to speed up decision-making. Samsung abolished its group control tower, the Future Strategy Office (FSO), at the end of February 2017. Currently, it operates three task forces (TFs) by business sector: business support (Samsung Electronics), financial competitiveness enhancement (Samsung Life Insurance), and EPC (engineering, procurement, and construction) competitiveness strengthening (Samsung C&T).

However, even if the control tower is restored, the consensus in the business community is that management will have to be conducted under strong internal controls (compliance), coordinating with the board of directors and the compliance committee.

The question of whether Lee will be promoted to chairman is also a hot topic. Since his promotion to vice chairman at age 44 in December 2012, he has held the position for 10 years and remains the only head of a 'top 4 conglomerates' group without the chairman title.

Promotion to chairman is not a title under the Commercial Act, so it is decided by a meeting of key internal executives. If Lee becomes chairman this year, he will assume the position about 10 years later than his late father, the former Samsung Chairman Lee Kun-hee, who became chairman at age 45 (December 1987).

There is also interest in whether Lee will become a registered executive director. This requires approval from the board of directors and the shareholders' meeting. Lee stepped down as a registered executive director after his three-year term ended on October 26, 2019, and has been an unpaid non-registered executive since. Due to his parole status, he could not serve as a registered executive director, but the pardon has reopened this opportunity. Some speculate that he might not become a registered executive director due to judicial risks such as ongoing trials.