Samsung's De Facto Leader Is Out Of Jail. Now What?
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Samsung Group's heir-apparent Lee Jae-Yong (C) leaves for a waiting facility after attending a court hearing on whether he will be issued with an arrest warrant at the Seoul Central District Court in Seoul on January 18, 2017. / AFP PHOTO / JUNG Yeon-Je
Lee Jae-young, the 49-year-old de facto leader of Samsung Group, walked free on Monday following a year behind bars. That news shook South Korea, where a liberal president was elected last year in a popular belief that conglomerates like Samsung hold too much sway in Korean society.
Lee received a five-year prison sentence in August for corruption charges. Now, he’s back in charge as the heir apparent of Samsung, whose most famous affiliate, Samsung Electronics, enjoyed record-high revenue in 2017.
As the vice chairman of Samsung Group, Lee's main purview is long-term decision making. (His father, the company's chairman, has been hospitalized since 2014.) Gyu-Chang Yu, a business professor at Seoul’s Hanyang University business, said Lee has say on Samsung's M&A, the selling of affiliates and major restructuring. “He will make important, long-term decisions for Samsung’s future,” Yu said in a phone interview.
Samsung Electronics Co.'s Seocho office building stands in Seoul, South Korea, on Friday, Feb. 17, 2017. Photographer: SeongJoon Cho/Bloomberg
Expect more mergers and market-moving decisions with the Lee's return
While Samsung posted record profits for 2017, the company is facing a slew of challenges, particularly at Samsung Electronics. Chip-making drove sales last year, but experts caution that that cash cow will soon dry up. As other, less expensive companies catch up in the coming years, Samsung will no longer dominate the semiconductor game. “It’s a huge risk to Samsung Group in the future and the Korean economy as well,” said Park Sang-in, a professor at Seoul National University’s Graduate School of Public Administration, in an October phone interview.
Samsung has naturally engaged in strategic planning even without Lee. But that’s been executed on an individual firm basis, not company-wide, said Tom Kang, research director of mobile devices at analysis firm Counterpoint Research. Samsung Electronics, where a Silicon Valley mindset has become the norm, has been especially innovative.
Related:Samsung Has A New $150 Million Startup Fund -- What Could Go Wrong?
Lee has proved himself adept at navigating those sorts of long-term strategy issues. He has set a company-wide tone that, unlike the past, Samsung should engage in M&A and collaborate with other firms. In a typical Korean conglomerate, firms will only use products produced by other affiliate firms. Such was pinpointed as the cause of Samsung’s exploding Galaxy Note 7, which used in-house products rather than seeking better, non-exploding components from other companies.
Jay Y. Lee, co-vice chairman of Samsung Electronics Co., center, speaks to members of the media as he leaves the Seoul Detention Center in Uiwang, South Korea, on Monday, Feb. 5, 2018. Photographer: Jean Chung/Bloomberg
For instance, Lee led the November 2016 acquisition of American automotive audio company Harman. The $8 billion purchase was the largest in Samsung’s history. Since then, Samsung Electronics has expressed interest in buying up more companies in the automotive, digital health and business software sectors. In December, Young Sohn, Samsung Electronics chief strategy officer and president, said in a Reuters interview that his company is “committed to using M&A as a tool.”
Since the announced retirement of Samsung Electronics CEO Kwon Oh-Hyun, who spent three decades at the company, Samsung Electronics’ old guard has been retreating from its leadership in recent months. Yu of Hanyang said it’s a sign that Lee, a relative spring chicken at 49, will be in a better position to further evangelize a sprightlier and less conservative Samsung.
"It's more likely they'll do something bigger now that he's back," Mark Newman, an analyst for Sanford C. Bernstein, said in a Wall Street Journal interview on Monday.
Less reliance on what’s a known winner, like memory chips, and greater emphasis on new tech concepts like mobility and preventative health. It’s the sort of thing Lee, a trilingual Harvard Business School dropout, has excelled at.
Keeping his distance
Despite his global knowledge and innovative mindset, Lee has been accused of upholding an age-old practice of Korean conglomerate culture — government favors. His alleged involvement in a massive influence-peddling scandal, which resulted in former President Park Geun-hye’s impeachment and imprisonment last year, is what got Lee behind bars for nearly a year. Lee was found guilty in August for paying $6.38 million to win government approval for a merger between two Samsung affiliates. (That money specifically went to fund equestrian training for the daughter of one of Park’s confidantes. Both the confidante and Park remain imprisoned.)
More on Forbes:Five Things To Know About South Korea's Presidential Scandal
The lower court found Lee guilty on all five charges in August, sentencing him to five years in prison, in what it ruled "a classic example of backscratching between political and capital powers," reported Yonhap News Agency on Monday. Lee's legal team appealed that decision and the appeals court, which ruled this week, took a different tack on the issue, pinning the blame on Park and her confidante.
The bribery conviction concerning equestrian training still remains. Lee, who has pleaded not guilty on all counts, is working to overturn that.
“I apologize for disappointing all. The past year has been a time for me to look back on myself. I will take more caution and do better,” Lee said upon leaving the court on Monday, reported the Korea Herald.
">Samsung Group's heir-apparent Lee Jae-Yong (C) leaves for a waiting facility after attending a court hearing on whether he will be issued with an arrest warrant at the Seoul Central District Court in Seoul on January 18, 2017. / AFP PHOTO / JUNG Yeon-Je
Lee Jae-young, the 49-year-old de facto leader of Samsung Group, walked free on Monday following a year behind bars. That news shook South Korea, where a liberal president was elected last year in a popular belief that conglomerates like Samsung hold too much sway in Korean society.
Lee received a five-year prison sentence in August for corruption charges. Now, he’s back in charge as the heir apparent of Samsung, whose most famous affiliate, Samsung Electronics, enjoyed record-high revenue in 2017.
As the vice chairman of Samsung Group, Lee's main purview is long-term decision making. (His father, the company's chairman, has been hospitalized since 2014.) Gyu-Chang Yu, a business professor at Seoul’s Hanyang University business, said Lee has say on Samsung's M&A, the selling of affiliates and major restructuring. “He will make important, long-term decisions for Samsung’s future,” Yu said in a phone interview.
Samsung Electronics Co.'s Seocho office building stands in Seoul, South Korea, on Friday, Feb. 17, 2017. Photographer: SeongJoon Cho/Bloomberg
Expect more mergers and market-moving decisions with the Lee's return
While Samsung posted record profits for 2017, the company is facing a slew of challenges, particularly at Samsung Electronics. Chip-making drove sales last year, but experts caution that that cash cow will soon dry up. As other, less expensive companies catch up in the coming years, Samsung will no longer dominate the semiconductor game. “It’s a huge risk to Samsung Group in the future and the Korean economy as well,” said Park Sang-in, a professor at Seoul National University’s Graduate School of Public Administration, in an October phone interview.
Samsung has naturally engaged in strategic planning even without Lee. But that’s been executed on an individual firm basis, not company-wide, said Tom Kang, research director of mobile devices at analysis firm Counterpoint Research. Samsung Electronics, where a Silicon Valley mindset has become the norm, has been especially innovative.
Related:Samsung Has A New $150 Million Startup Fund -- What Could Go Wrong?
Lee has proved himself adept at navigating those sorts of long-term strategy issues. He has set a company-wide tone that, unlike the past, Samsung should engage in M&A and collaborate with other firms. In a typical Korean conglomerate, firms will only use products produced by other affiliate firms. Such was pinpointed as the cause of Samsung’s exploding Galaxy Note 7, which used in-house products rather than seeking better, non-exploding components from other companies.
Jay Y. Lee, co-vice chairman of Samsung Electronics Co., center, speaks to members of the media as he leaves the Seoul Detention Center in Uiwang, South Korea, on Monday, Feb. 5, 2018. Photographer: Jean Chung/Bloomberg
For instance, Lee led the November 2016 acquisition of American automotive audio company Harman. The $8 billion purchase was the largest in Samsung’s history. Since then, Samsung Electronics has expressed interest in buying up more companies in the automotive, digital health and business software sectors. In December, Young Sohn, Samsung Electronics chief strategy officer and president, said in a Reuters interview that his company is “committed to using M&A as a tool.”
Since the announced retirement of Samsung Electronics CEO Kwon Oh-Hyun, who spent three decades at the company, Samsung Electronics’ old guard has been retreating from its leadership in recent months. Yu of Hanyang said it’s a sign that Lee, a relative spring chicken at 49, will be in a better position to further evangelize a sprightlier and less conservative Samsung.
"It's more likely they'll do something bigger now that he's back," Mark Newman, an analyst for Sanford C. Bernstein, said in a Wall Street Journal interview on Monday.
Less reliance on what’s a known winner, like memory chips, and greater emphasis on new tech concepts like mobility and preventative health. It’s the sort of thing Lee, a trilingual Harvard Business School dropout, has excelled at.
Keeping his distance
Despite his global knowledge and innovative mindset, Lee has been accused of upholding an age-old practice of Korean conglomerate culture — government favors. His alleged involvement in a massive influence-peddling scandal, which resulted in former President Park Geun-hye’s impeachment and imprisonment last year, is what got Lee behind bars for nearly a year. Lee was found guilty in August for paying $6.38 million to win government approval for a merger between two Samsung affiliates. (That money specifically went to fund equestrian training for the daughter of one of Park’s confidantes. Both the confidante and Park remain imprisoned.)
More on Forbes:Five Things To Know About South Korea's Presidential Scandal
The lower court found Lee guilty on all five charges in August, sentencing him to five years in prison, in what it ruled "a classic example of backscratching between political and capital powers," reported Yonhap News Agency on Monday. Lee's legal team appealed that decision and the appeals court, which ruled this week, took a different tack on the issue, pinning the blame on Park and her confidante.
The bribery conviction concerning equestrian training still remains. Lee, who has pleaded not guilty on all counts, is working to overturn that.
“I apologize for disappointing all. The past year has been a time for me to look back on myself. I will take more caution and do better,” Lee said upon leaving the court on Monday, reported the Korea Herald.
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