Samsung's Chairman Appointment by the Group Head Imminent... Accelerating Governance Restructuring

[Image source=Yonhap News]

[Asia Economy Reporter Park Sun-mi] With Lee Jae-yong, Vice Chairman of Samsung, resuming full-scale management activities, Samsung, the only one among the four major conglomerates whose head does not hold the chairman position, is increasingly likely to promote Lee to chairman within the year.

According to the business community on the 16th, with the lifting of the five-year employment restriction that had tied Lee’s hands and feet due to the special pardon on August 15th Liberation Day, there is growing weight behind the possibility that Samsung will push for Lee’s promotion to chairman, enabling him to serve as a central figure.

The biggest reason Samsung left the chairman position vacant for a long time after the late Chairman Lee Kun-hee’s absence was Lee Jae-yong’s judicial risk. Although Lee was promoted to vice chairman in the year-end personnel reshuffle of 2012 and could have taken the vacant chairman position after Chairman Lee’s death in October 2020, Lee was carrying judicial risks due to the political scandal at that time, making it difficult for him to be promoted to chairman. In fact, despite being responsible for the overall management of Samsung, he could not assume the chairman position because of these judicial risks.

Accordingly, the business community places significant weight on the possibility that Lee, reinstated by the Liberation Day special pardon, will be promoted to chairman as soon as possible to serve as Samsung’s central figure. Lee could be promoted to chairman after returning as a registered director, a status that expired in October 2019, but since procedures such as shareholder meeting approval are required for reinstatement as a registered director, there is also the possibility that he could first be promoted to chairman internally while still an unregistered executive.

Surrounded by global economic uncertainty and crisis, Samsung urgently needs a central figure capable of making bold decisions and organizational restructuring. The prevailing view is that Lee’s promotion to chairman must be carried out as quickly as possible to facilitate large-scale mergers and acquisitions (M&A), investments, and governance restructuring.

The long-standing issue of Samsung’s governance restructuring is also likely to accelerate after Lee’s promotion to chairman. Samsung has been pursuing governance restructuring since 2013, but related work was delayed when Lee was sentenced to two and a half years in prison.

Currently, Samsung’s governance structure flows from the owner family including Lee Jae-yong → Samsung C&T Corporation → Samsung Life Insurance → Samsung Electronics. The owner family, including Lee, holds 31.31% of Samsung C&T’s shares, through which they indirectly control Samsung Life Insurance and Samsung Electronics. If the ruling party’s proposed amendment to the Insurance Business Act passes, Samsung Life Insurance will have to sell most of its Samsung Electronics shares (8.51%), weakening Lee’s group control. Additionally, the sale of Samsung Electronics shares by Samsung Life Insurance raises risks of harm to minority shareholders and exposure to foreign speculative capital.