Samsung Compliance Committee's October Regular Meeting: Interest in Vice Chairman Lee Jae-yong's Participation
[Asia Economy Reporter Moon Chae-seok] Amid expectations that Samsung Group will announce a 'New Management Declaration' centered on Samsung Electronics Vice Chairman Lee Jae-yong under the banner of 'New Samsung,' attention is focused on whether the management, including Vice Chairman Lee, will participate in this month's regular meeting of the Compliance Committee. This is because the direction of governance restructuring centered on the Samsung family has emerged as a hot topic, alongside various scenarios such as corporate split rumors, organizational restructuring including the revival of the control tower, and speculation about Vice Chairman Lee's promotion to chairman, all of which may be realized simultaneously.
According to the business community on the 5th, eyes are on whether Vice Chairman Lee and the management will attend the Compliance Committee's regular meeting scheduled around the 18th. According to the Compliance Committee, the last regular meeting held last month did not discuss any 'special agenda' such as advisory meetings related to the group’s control tower, aside from the usual agenda like prior approval for internal transactions exceeding 5 billion KRW.
However, since Samsung Group is hastening the review of the governance consulting research report commissioned from Boston Consulting Group (BCG), it is speculated that the Compliance Committee has shared some of this content. The Compliance Committee stated that they "cannot confirm" this, but there is growing analysis that they cannot ignore the internal and external pressure to accelerate discussions on governance restructuring centered on the owner family. The Compliance Committee also stated, "No decision has been made yet regarding Vice Chairman Lee and the management's attendance at the October regular meeting."
About a month after his pardon and reinstatement on Liberation Day, Vice Chairman Lee has accelerated on-site management in Korea, Latin America, and Europe (UK). He even directly mentioned the possibility of discussing the acquisition and merger (M&A) negotiations of the UK’s world-renowned fabless company ARM with SoftBank Chairman Masayoshi Son, the largest shareholder of ARM. Chairman Son is currently visiting Korea.
There is also an opinion that the group’s control tower should be revived to enable swift decision-making necessary for M&A. If Samsung Group reorganizes the control tower, it is analyzed that the Compliance Committee, an independent supervisory body from Samsung Group, will also speed up its preparation for legal risk checks and advisory roles. The Compliance Committee responded, "We are not in a position or situation to make decisions regarding Samsung Group’s governance improvement, but if governance improvement work begins, we will faithfully perform monitoring and checks for any legal risks."
Even if the control tower is revived, there is an argument that Vice Chairman Lee’s management rights must be solid to operate it stably. Management rights come from a solid governance structure. Among Samsung’s governance, the core course from 'Vice Chairman Lee Jae-yong → Samsung C&T → Samsung Life Insurance → Samsung Electronics' has a notably weak link between Life Insurance and Electronics, and the ongoing National Assembly discussions on revising the Insurance Business Act (so-called Samsung Life Insurance Act), which limits insurance affiliates’ stock holdings to 3% of total assets, is a variable.
Although the possibility of revision is not considered high, if realized, Samsung Life Insurance would have to dispose of about 20 trillion KRW worth of Samsung Electronics shares, potentially weakening Vice Chairman Lee’s group control. Regarding this, the Compliance Committee said, "Whether it is the Samsung Life Insurance Act or any other issue, if new matters arise, we will conduct prior reviews and monitoring of legal risks."
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