Lee Jae-yong's 'New Samsung' on Track: Direct Oversight of Electronics and Prospects for Autonomous Subsidiary Management

Lee Jae-yong Style Autonomous Management Likely to Begin in Earnest
Long-term Possibility of Separation of Ownership and Management Like Sweden's Wallenberg Family

Samsung Electronics Vice Chairman Lee Jae-yong is entering the Samsung Seoul Hospital funeral hall in Irwon-dong, Gangnam-gu, where the late Samsung Chairman Lee Kun-hee's memorial is set up, along with his children on the 25th. Photo by Yoon Dong-ju doso7@

[Asia Economy Reporter Changhwan Lee] With the passing of Samsung Chairman Lee Kun-hee, the era of Lee Jae-yong's 'New Samsung' has officially begun. Vice Chairman Lee plans to directly manage Samsung Electronics, the core of the group, for the time being, while maintaining the current management system where other affiliates are entrusted to the autonomy of their respective CEOs. In the long term, he is considering introducing a Western-style management system that separates ownership and management, similar to Sweden's Wallenberg family.

According to the business community on the 26th, Vice Chairman Lee has been leading Samsung under an autonomous management system since his father collapsed in 2014. While he directly decides on major issues such as large-scale investments and mergers and acquisitions (M&A) centered on Samsung Electronics, the group's core affiliate, detailed management is led by each affiliate's CEO.

In particular, after Vice Chairman Lee was imprisoned in February 2017 due to the 'political scandal' case, Samsung officially dismantled the Future Strategy Office (FSO), the group's control tower, and distributed authority to the affiliates. Since the dissolution of the FSO, Samsung has established a three-subgroup system consisting of electronics affiliates such as Samsung Electronics, non-electronics manufacturing affiliates such as Samsung C&T, and financial affiliates such as Samsung Life Insurance.

Samsung Electronics is directly managed by Vice Chairman Lee, but the other affiliates operate under an autonomous management system. It is expected that this autonomous management system, where the other affiliates are led by their respective presidents while focusing on Samsung Electronics under Vice Chairman Lee, will be maintained for the time being.

On the 25th, the day Lee Kun-hee, Chairman of Samsung Group, passed away, the flag at the Samsung Electronics building in Seocho-gu, Seoul, was fluttering in the wind. Photo by Dongju Yoon doso7@

◆Long-term Prospect of Introducing Western-style Management System Separating Ownership and Management

In the long term, there is a high possibility that Vice Chairman Lee will change the governance structure by separating ownership and management. On May 6, he publicly apologized regarding the succession of management rights and stated that he would not pass on management rights to his children in the future. At the press conference, he said, "I and Samsung have received much criticism regarding the succession issue," and "I do not intend to pass on management rights to my children."

This is a declaration to end the succession-style management that has continued for three generations with the late founder Lee Byung-chul, Chairman Lee, and Vice Chairman Lee, and to move toward a New Samsung where ownership and management are separated. In the long term, it is also interpreted as meaning that he will entrust the management of affiliates to professional managers and step back to focus on recruiting and placing key talents.

Vice Chairman Lee has long held the idea of ending hereditary management. He said, "I have thought for a long time not to pass on the company's management rights to my children," adding, "The management environment is not easy, and I think it is irresponsible to mention my succession issue before I myself have been properly evaluated."

The separation of the CEO and chairman positions at Samsung Electronics in 2018, and this year appointing an outside director as chairman for the first time, are also seen as reflecting Vice Chairman Lee's intentions.

The business community expects Vice Chairman Lee to seek changes in management methods in the future by referring to advanced countries' examples. A representative case is the Wallenberg Group, Sweden's largest corporate group. The Wallenberg family, which owns Ericsson and Scania, is famous for operating companies by separating ownership and management. Wallenberg entrusts the management rights of each subsidiary independently to professional managers and exercises control over subsidiaries through the holding company Investor.

On the 26th, at the entrance of the funeral hall of Seoul Samsung Hospital in Gangnam-gu, Seoul, reporters are covering mourners visiting the late Chairman Lee Kun-hee's funeral site of Samsung Group. Photo by Joint Press Corps

◆Owner Management Has Many Advantages... Immediate Separation of Ownership and Management Unnecessary

However, the business community analyzes that the possibility of Samsung immediately separating ownership and management is low, given the many advantages of owner management.

The greatest advantage of owner management is the ability to make swift decisions and bold investments based on strong leadership. It is analyzed that the steadfast drive of the owners, Chairman Lee and the second-generation Chairman Lee, greatly contributed to raising the electronics industry?including semiconductors, home appliances, and smartphones?to world-class levels.

In Samsung's early electronics business, there was much criticism and concern about whether advanced industries could be possible in a developing country like Korea, and in fact, investments were made without earning profits.

However, Samsung made bold investments from a long-term perspective based on strong ownership and has risen to its current level. Samsung's proactive and bold investments in future growth engines such as system semiconductors, artificial intelligence (AI), next-generation communications, and biosimilars are also based on this strong ownership.

A business community official said, "Owner management has various advantages such as fast decision-making and large-scale investments," adding, "Since Samsung has grown under an owner management system, there seems to be no need to hastily change the management system while taking risks."

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