Lee Jae-yong Meets Compliance Committee After 1 Year 9 Months, Promises 'Compliance Management'... Compliance Chair: "Control Tower Needed" (Summary)

Vice Chairman Lee's First Meeting with 2nd Compliance Committee Members on the 12th Afternoon
Confirmation of 'Compliance Management'... Commitment to Non-Transfer of Management Rights and Guarantee of Labor Rights

Chairman Lee: "Regular Meetings Between Vice Chairman Lee and Compliance Committee"

Vice Chairman Lee Jae-yong of Samsung Electronics attended the continuation of the first trial held at the Seoul Central District Court in Seocho-gu on August 12, when he received a pardon and reinstatement from the government on Liberation Day. After finishing the morning trial, he left the courtroom and expressed his position regarding the reinstatement decision. (Photo by Yonhap News)

[Asia Economy Reporter Moon Chaeseok] Samsung Electronics Vice Chairman Lee Jae-yong attended the regular meeting of the '2nd Compliance Committee,' an independent legal oversight and advisory body separate from the Samsung Group, on the 12th and pledged to practice 'compliance management.' Amid reports that Vice Chairman Lee and the Compliance Committee have reached some level of understanding regarding the revival of a control tower overseeing group decision-making, similar to the former Future Strategy Office, Compliance Committee Chairman Lee Chan-hee attracted attention by stating, "I believe a control tower is necessary."

Vice Chairman Lee attended the October regular meeting of the Compliance Committee held at Samsung Seocho Town in Seocho-gu, Seoul, at 1:30 p.m. that day and had a meeting lasting just over an hour. This was the first time Vice Chairman Lee attended the 2nd Compliance Committee, which was launched in February.

"Lee Jae-yong Confirms Compliance Management... Expresses Willingness to Participate in ESG Management"

Samsung Electronics Vice Chairman Lee Jae-yong, as part of his "on-site management," visited the Samsung Engineering Dos Bocas refinery construction site in Mexico on the 10th of last month (local time) and took a commemorative photo with employees. (Photo by Yonhap News)

According to the Compliance Committee on that day, during the meeting, Vice Chairman Lee pledged faithful implementation of the fair and transparent 'compliance management' announced to the public in 2020 and expressed his active participation in ESG (Environmental, Social, and Governance) management. He also emphasized protecting labor rights and communicating with various stakeholders.

The Compliance Committee stated that during the meeting with Vice Chairman Lee, they requested efforts to prevent compliance violation risks and asked for increased attention to establishing a compliance culture within the company. Vice Chairman Lee responded to the Compliance Committee by saying, "I will cooperate to the fullest extent so that the committee can operate independently and continuously."

According to sources inside and outside the business community, Vice Chairman Lee also reaffirmed commitments made during the 2020 public announcement process, such as non-transfer of management rights and guaranteeing the three labor rights. Furthermore, discussions regarding the revival of Samsung Group's control tower were reportedly held.

Regarding this, after the Compliance Committee meeting, Chairman Lee Chan-hee told reporters that the meeting with Vice Chairman Lee involved "broad discussions about the role and direction of the Compliance Committee, but no specific plans were discussed," adding, "Since it was the first meeting, we talked about broad directional issues, and (Vice Chairman Lee) listened to the committee members a lot."

Lee Chan-hee: "Control Tower Needed... Chairman's Personal Opinion"

Lee Chan-hee, Chairman of the Samsung Compliance Committee, speaking at a press briefing held at the law firm Yulchon in Gangnam-gu, Seoul, on the morning of January 26. (Photo by Yonhap News)

While Vice Chairman Lee agreed on guaranteeing the independence of the Compliance Committee, Chairman Lee also reiterated his agreement on the necessity of reviving the group control tower. Although practical matters such as governance restructuring were not directly discussed, this publicly showed alignment with the group’s stance, which is reportedly reviewing governance to strengthen the owner's management rights.

The 2nd Compliance Committee has also identified 'realizing ESG management through governance improvement' as one of its three core tasks and has been promoting Samsung Group's governance improvement efforts. Although the specific details of the meeting were not disclosed, the business community widely believes that discussions on restoring the group control tower and governance improvement measures took place.

Chairman Lee said, "Personally, I believe a control tower is necessary, but the committee consists of seven members with equal voting rights, so I cannot act arbitrarily, and all members have equal voting rights."

Chairman Lee hinted that meetings between the Compliance Committee and Vice Chairman Lee will become regular. He also expected the number of meetings to gradually increase. He said, "We will proceed with regular meetings. During the 1st committee, we could not meet frequently due to COVID-19, but we will meet more often and be able to meet whenever necessary."

Lee Chan-hee: "No Discussion on Chairman Lee’s Promotion"

Vice Chairman Lee Jae-yong of Samsung Electronics taking a commemorative photo with employees during his visit to Samsung SDS in Songpa-gu, Seoul on August 30 as part of his "on-site management." (Photo by Yonhap News)

Chairman Lee drew a line on speculation about Vice Chairman Lee’s promotion to chairman, which has attracted intense interest from the business community, stating, "There was absolutely no discussion about (promotion to chairman)."

While the founding anniversary of Samsung Electronics on the 1st of next month is strongly mentioned as the likely timing for Vice Chairman Lee’s inauguration as chairman, other dates such as the 2nd anniversary of the late Chairman Lee Kun-hee on the 25th, the 35th anniversary of the late former Chairman Lee Byung-chul on the 19th of next month, and the regular personnel reshuffle season for executives in December are also cited. There is also talk of him taking the chairman title after the regular shareholders' meeting in March next year when he becomes a registered executive, but the possibility is considered low due to 'judicial risks.' Vice Chairman Lee is currently facing trials related to the unfair merger of Samsung C&T and Cheil Industries and allegations of accounting fraud at Samsung BioLogics.

Even if Samsung declares a 'New Samsung' with a new management declaration and the revival of the control tower, the consensus is that without governance restructuring, decision-making momentum will inevitably weaken. Many believe that creating a decision-making system without a solid management right centered on Vice Chairman Lee and the owner family will make it difficult to gain management momentum. Samsung abolished the Future Strategy Office, the group’s control tower, in 2017 and currently operates three task forces by business division, but with the semiconductor market downturn and overlapping security issues in major countries like the U.S. and China, it faces pressure to execute large-scale mergers and acquisitions (M&A) and facility investments.

In Samsung’s governance structure, the key course runs from 'Vice Chairman Lee Jae-yong → Samsung C&T → Samsung Life Insurance → Samsung Electronics,' but the link between Life Insurance and Electronics is weak. The National Assembly is discussing amendments to the Insurance Business Act (so-called Samsung Life Insurance Act), which limits insurance affiliates' stock holdings to 3% of total assets, posing a variable. Although many believe the amendment is unlikely, if realized, Samsung Life Insurance would have to dispose of about 20 trillion won worth of Samsung Electronics shares, potentially weakening Vice Chairman Lee’s group control. The Compliance Committee stated, "Whether it is the Samsung Life Insurance Act or any other issue, if it arises, we will conduct prior risk reviews and monitoring of legal violations."

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