Samsung Takes First Step Toward Ownership-Management Separation... Heading Toward a 'Korean-Style Wallenberg'?

Decision to Change Management Style Like Advanced Countries
Management to Be Entrusted to Professional Managers, Vice Chairman Lee Expected to Focus on Talent Recruitment, Investment, etc.
"Thought About It Long Ago, Strengthening Board Independence and Transparency"

Samsung Electronics Vice Chairman Lee Jae-yong is making a public apology on the 6th at the Seocho-dong headquarters regarding succession of management rights, non-union management, and communication with civil society. Photo by Moon Honam munonam@

[Asia Economy reporters Changhwan Lee and Gimin Lee] Samsung Electronics Vice Chairman Lee Jae-yong’s declaration to halt succession of management rights marks the first step of the 'New Samsung.' The business community expects that with Lee’s official announcement to separate ownership and management, the 'JY (Vice Chairman Lee)-style New Samsung' management, benchmarked after Sweden’s Wallenberg family, will gain full momentum.

It is anticipated that Vice Chairman Lee will entrust the management of affiliates to professional managers in the long term, while stepping back himself to focus his capabilities on recruiting and positioning key talents. Through this, Lee envisions transforming Samsung into a company befitting South Korea’s elevated national stature following the COVID-19 pandemic.

◆Will Samsung unveil a collective governance structure?= The core of Vice Chairman Lee’s public apology announced on the 6th is his intention not to pass on management rights to his children. He stated, "Samsung and I have received much criticism regarding succession issues," and added, "I do not intend to pass management rights to my children."

This declaration ends the succession-style management that has continued for three generations?from the late founder Lee Byung-chul, to Chairman Lee Kun-hee, and now Vice Chairman Lee?and signals a move toward a New Samsung with separated ownership and management. Vice Chairman Lee has one son (20) and one daughter (16), and while his children may inherit shares, they are expected to step back from management rights.

Lee has long held the view of breaking the cycle of inherited management. He explained, "I have thought for a long time not to pass company management rights to my children," adding, "The management environment is by no means easy, and I believe it would be irresponsible to discuss my succession before I myself have been properly evaluated."

Following Samsung Electronics’ separation of the CEO and board chairman roles in 2018, and this year appointing an outside director as chairman for the first time, Lee’s intentions are reflected in these moves. While these measures aim to enhance the transparency and independence of the board, they can also be interpreted as groundwork for separating ownership and management in the long term.

The business community expects Vice Chairman Lee to seek changes in management style by referencing advanced country cases. A representative example is Sweden’s largest corporate group, the Wallenberg Group. The Wallenberg family, owners of Ericsson and Scania, is famous for operating companies by separating ownership and management.

The Wallenbergs entrust independent management rights of each subsidiary to professional managers and exercise control over subsidiaries through the holding company Investor AB. The Wallenberg Foundation, owned by the family, operates a collective governance structure controlling about 100 companies including telecommunications equipment (Ericsson), home appliances (Electrolux), heavy industry (ABB), finance (SEB), construction equipment (Scania), and pharmaceuticals (AstraZeneca).

The future vision Vice Chairman Lee has for Samsung is expected to be similar. Samsung Group has had ties with the Wallenbergs since Chairman Lee’s era. In 2003, during a business trip to Sweden, Chairman Lee met with the Wallenbergs to exchange views on management systems and corporate social roles. Vice Chairman Lee also met with the Wallenberg chairman during his visit to Korea at the end of last year, following a meeting in 2012, to discuss various opinions.

Besides the Wallenbergs, many advanced country companies such as Ford and GM in the U.S., and Lego and Bosch in Europe, already operate by separating ownership and management. This is also seen as a way to avoid large inheritance taxes and is regarded as a trend in corporate management. Warren Buffett in the U.S. owns many companies through Berkshire Hathaway but entrusts management to experts, focusing only on investment and personnel management.

◆Abolishing no-union management... Creating a Samsung for the people= The New Samsung is expected to contribute to social development by abolishing no-union management and strengthening communication with civil society. Vice Chairman Lee said he aims to build a Samsung that suits Korean society, whose national stature has risen through effective COVID-19 response.

He emphasized, "During the unprecedented crisis over the past two to three months, I deeply felt what true national stature means," and added, "I will create a new Samsung that matches the national stature of the Republic of Korea."

Meanwhile, the Samsung Compliance Committee, which received Vice Chairman Lee’s apology, plans to hold its 5th meeting at 2 p.m. on the 7th at Samsung Life Seocho Tower to gather opinions from committee members and issue a statement. Since the Compliance Committee has actively reflected civil society’s views on Samsung, it is expected to demand concrete action plans regarding management rights, labor unions, and communication with civil society.

This content was produced with the assistance of AI translation services.