First Compliance Committee Regular Meeting After Lee Jae-yong's Release... Likely to Discuss Governance Restructuring

Vice Chairman Lee, High Possibility of Absence

Samsung Electronics Vice Chairman Lee Jae-yong appeared at the first trial continuation hearing held on the 12th at the Seoul Central District Court in Seocho-gu. After finishing the morning session, he left the courtroom while expressing his position on the lottery decision. (Photo by Yonhap News)

[Asia Economy Reporter Moon Chaeseok] With the reinstatement of Samsung Electronics Vice Chairman Lee Jae-yong, the Samsung Compliance Committee's regular meeting will be held on the 16th. This will be the first meeting after Lee's reinstatement, and discussions on corporate governance restructuring are expected. It is unlikely that Vice Chairman Lee will attend.

According to the Compliance Committee, the regular meeting will take place at 2 p.m. at the Samsung Life Building in the Samsung Seocho Office in Seocho-gu, Seoul. The possibility of Lee attending is low, as it would be burdensome for him to attend a Compliance Committee meeting immediately after his reinstatement.

At the meeting, routine matters such as approval of internal transactions and reports related to complaints and tips received by the Compliance Committee will mainly be addressed. Regarding corporate governance restructuring, there is a possibility that discussions will focus on reorganizing the governance structure so that the owner family does not inherit management but controls the board of directors through a 'board management' approach. A Compliance Committee official stated, "However, it will not be easy to finalize a concrete corporate governance restructuring plan in just one or two meetings."

The Compliance Committee and Samsung Group have been reviewing various corporate governance improvement plans since Vice Chairman Lee announced in May 2020 that he would not pursue fourth-generation succession. The second-term Compliance Committee, launched in February, selected "realizing ESG (Environmental, Social, and Governance) management through corporate governance improvement" as one of its three main tasks. Lee Chan-hee, chairman of the second-term Samsung Compliance Committee, emphasized at its launch, "Corporate governance is a challenge that Samsung must solve to leap forward."

Samsung's corporate governance structure follows the chain: "Owner family → Samsung C&T → Samsung Life Insurance → Samsung Electronics." The owner family, including Vice Chairman Lee who is the largest shareholder of Samsung C&T with 17.97%, holds 31.31% of Samsung C&T shares. This stake indirectly controls Samsung Life Insurance, Samsung Electronics, and others. After the death of Chairman Lee Kun-hee, Vice Chairman Lee inherited shares and increased his stake in Samsung Life Insurance to 10.44%, strengthening his control over the group.

The amendment to the Insurance Business Act being promoted by the Democratic Party is a variable. The amendment specifies that the evaluation method for insurance company affiliates' shares must be based on "market value," and that only up to 3% of total assets can be held. Samsung Life Insurance's stake in Samsung Electronics is valued at over 30 trillion won. If the bill is passed, Samsung Life Insurance would have to sell Samsung Electronics shares worth over 20 trillion won, which would weaken Vice Chairman Lee's control accordingly.

Meanwhile, the Compliance Committee explained that the opposition party's speculated response plan to the Insurance Business Act amendment will not be discussed at this meeting. Last year, Samsung commissioned Boston Consulting Group (BCG) with a task related to restructuring key stakeholders' corporate governance, but the report from BCG has not yet been received.

Even if Vice Chairman Lee does not attend this meeting, there is a high possibility that he will meet with the Compliance Committee soon. Earlier, in March, Vice Chairman Lee met with Chairman Lee Chan-hee and expressed his intention to regularize meetings with Compliance Committee members. It is reported that Vice Chairman Lee and the Compliance Committee share the goal of completing Samsung's ethical and compliance management framework and developing it into a "business community standard."