[Viewpoint] The Tasks and Challenges Facing Lee Jayong and Chung Euisun

Over the past month, both Samsung and Hyundai Motor Group have reached turning points. Hyundai Motor Group officially took over management as Chairman Chung Eui-sun was appointed Chairman and CEO of Hyundai Motor and Mobis, as well as non-registered executive chairman of Kia Motors. Samsung also entered a new era led by Vice Chairman Lee Jae-yong following the passing of Chairman Lee Kun-hee. Since both individuals have effectively led their groups for several years, the recent developments are not expected to drastically change the two groups immediately, but the official start of third-generation management holds significant meaning.

Both face different challenges and tasks than their fathers did, and how they address these will not only determine the future direction of their groups but also have a major impact on South Korea’s corporate sector and economy. Although Lee Kun-hee and Chung Mong-koo inherited their groups from their predecessors, Samsung Electronics and Hyundai Motor were essentially re-founded by these two, transforming them into undisputed global leading companies.

What is the reason behind Samsung and Hyundai Motor’s success today? Professor Chung Goo-hyun, Emeritus Professor at Yonsei University, analyzed in his lecture on the publication of "The Rise of East Asia 1960-2020" that the success of the two companies is due to outstanding management by two generations. While it may seem obvious, it is rare for both father and son to possess exceptional managerial skills and to have founded and led companies to success. Having two generations of excellent leaders is not only a great fortune for Samsung and Hyundai Motor but also for the South Korean economy.

Despite their achievements, the process of passing management rights from Lee Kun-hee and Chung Mong-koo to their sons remains a blemish. Illegal and improper methods such as preferential treatment of affiliated companies and private gain were employed, resulting in both facing legal prosecution. Using Warren Buffett’s analogy, Lee Byung-chul and Chung Ju-yung qualified through national team selection trials and proudly won gold medals at the Olympics. After becoming the national team selectors themselves, they held trials where only their sons could participate, allowing Lee Kun-hee and Chung Mong-koo to compete in the Olympics as successors. Despite many concerns, both won gold medals. However, as selectors, they used their authority to send their sons to the Olympics and were punished for selection corruption.

The urgent task facing Lee Jae-yong and Chung Eui-sun is to organize their corporate governance structures. Chairman Chung must resolve Hyundai Motor’s circular shareholdings, while Vice Chairman Lee still faces his trial and must address inheritance tax payments and the handling of Samsung Electronics shares held by Samsung Life Insurance following amendments to insurance laws.

The long-term challenge is the succession of management rights within the groups. Vice Chairman Lee has already declared that there will be no fourth-generation succession, and Chairman Chung is under scrutiny from the government and investors, making it practically impossible to pass shares and management rights to the next generation in the same manner they inherited. However, the role of controlling shareholder families remains crucial in governance and corporate management. Although shares are expected to decrease due to inheritance taxes as the groups move to the next generation, their status as major shareholders will remain unchanged.

It is necessary to refer to cases such as Porsche and Wallenberg, where families have successfully passed down controlling shareholder status and roles across generations, while professional managers hold significant authority in running the companies, and the controlling families maintain balanced oversight and supervision. If the previous generation elevated the two groups to global corporate status, the greatest task and challenge for Lee Jae-yong and Chung Eui-sun is to maintain and develop this status while redefining the role of controlling shareholders, establishing a governance structure suited to Korean corporate realities that harmonizes and balances with the professional management system.

Shin Jin-young, Director of the Korea Corporate Governance Service and Professor of Business Administration at Yonsei University

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