Samsung shifts into damage-control mode
Top executives of Samsung Electronics were attempting to rally the troops as the South Korean conglomerate grappled with the prospect of a prolonged leadership vacuum, after the group’s billionaire heir-apparent Lee Jae-yong was sentenced to jail for corruption.
As Mr Lee’s defence lawyers filed an appeal against Friday’s ruling, Kwon Oh-hyun, Samsung’s vice chairman, stressed that executives would take the lead in overcoming the deepening leadership crisis.
In a message to employees on Monday, Mr Kwon said that, while the situation is “regrettable”, they should not be “shaken” by the verdict. “The business situations at home and abroad are too harsh for us to be mired in shock and confusion. We all need to gather power and wisdom to overcome this unprecedented crisis,” he said.
His comments came amid growing speculation among analysts that foreign shareholders, who collectively hold more than 50 per cent of Samsung Electronics, may push for more of a say in Samsung’s decision-making with Mr Lee’s long-term absence potentially leaving the company lacking direction in the long term.
“Foreign stakeholders will certainly try to raise their voice over management, demanding more shareholder-friendly measures,” said Kim Young-woo, analyst at SK Securities. “They could try to appoint outside directors they want or ask Samsung to increase dividends on the back of the company’s strong performance.”
Samsung already is expected to face increasing pressure from foreign investors to return more of its fat earnings this year to shareholders, with the company set to post a record operating profit of Won53tn in 2017 on robust sales of memory chips and flat panel displays.
For now, the company has gone into emergency mode after its de facto leader was sentenced to five years in prison on Friday over a string of graft charges in a corruption scandal that also led to the impeachment of South Korea’s former president, Park Geun-hye.
Local media have pointed out that Samsung Electronics could be vulnerable to a hostile takeover as the group’s founding family owns only about 5 per cent of the company and, together with group affiliates, controls about 20 per cent of the tech giant.
Reports have suggested that Elliott Management, the US activist hedge fund, could ask Samsung to replace some of its board members or to cancel the controversial merger of the group’s two affiliates, which led to the imprisonment of the group’s 49-year-old scion. They said Elliott could file a lawsuit seeking damages from the merger, which was seen as putting Mr Lee’s interests above those of minority shareholders.
Elliott declined to comment on Monday.
Park Ju-geun, head of research firm CEO Score, said “concerns of a hostile takeover attempt by foreign hedge funds at this stage seem overblown”. Nevertheless, Mr Park added: “Unlike other chaebol tycoons, Mr Lee was incarcerated while his control over the group is not stable yet. If he is found guilty in the final ruling, his control over the group could be shaken.”
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