'Unshackled' Lee Jae-yong Accelerates Responsible Management... 'JY Board' Expected to be Completed at March General Meeting

Acquitted in First Trial... Judicial Risk Resolved
Expected Return of Registered Director
No Issues in Articles of Incorporation

Samsung Electronics Chairman Lee Jae-yong, who was indicted on charges of 'unfair merger and accounting fraud,' has been freed from nearly nine years of management constraints. After being acquitted in the first trial, Chairman Lee, who resolved his judicial risks, is expected to accelerate the strengthening of 'responsible management.' There is also speculation that the timing of his return as a registered director may be brought forward to lay the foundation for responsible management. It is anticipated that Chairman Lee, who stepped down as a registered director three years ago, will officially return as a registered director at the upcoming Samsung Electronics annual general meeting next month, completing the 'Lee Jae-yong board' and hastening steps toward the 'New Samsung.'

According to the business and legal circles on the 5th, the Seoul Central District Court Criminal Division 25-2 (Presiding Judges Park Jeong-je, Ji Gwi-yeon, Park Jeong-gil) acquitted Chairman Lee, who was indicted on charges including unfair trading practices and market manipulation under the Capital Markets Act, and breach of duty.

Samsung Electronics Chairman Lee Jae-yong is leaving the courtroom after being acquitted in the first trial related to accounting fraud and unfair merger at the Seoul Central District Court in Seocho-gu, Seoul on the 5th. Photo by Kang Jin-hyung aymsdream@

Although the possibility of prosecution appeal remains, meaning judicial risks are not completely eliminated, Chairman Lee has been relieved of some burden as the legitimacy of the merger between Cheil Industries and Samsung C&T was recognized in the first trial.

This acquittal is also expected to expedite Chairman Lee’s return as a registered executive. Samsung Electronics is preparing for its annual general meeting next month.

Chairman Lee was promoted to chairman on October 27, 2022, but remains an unregistered executive. He was appointed as an inside director through an extraordinary general meeting on October 27, 2016. However, after becoming embroiled in the political scandal, facing judicial risks, he decided not to renew his inside director position. His term expired on October 26, 2019, and he has maintained his status as an unregistered executive since then.

The biggest difference between a registered director and an unregistered director is participation in the board of directors, which discusses key company decisions. Registered directors are included as board members, while unregistered directors are not. They are also excluded from penalties under laws such as the Serious Accidents Punishment Act. As a result, there have been criticisms that when the head of a conglomerate family is an unregistered executive, they have authority but no responsibility.

Previously, Samsung Electronics’ board approved Chairman Lee’s promotion agenda, emphasizing the strengthening of responsible management, enhancing management stability, and enabling swift and bold decision-making. This implies that only by becoming a registered director can Chairman Lee better fulfill these objectives.

In the business community, voices are emerging that Chairman Lee needs to become a registered director to actively manage, make investment decisions such as large-scale mergers and acquisitions (M&A), and take responsibility.

Among the heads of the four major conglomerates, Chairman Lee is the only one maintaining unregistered director status. SK Group Chairman Chey Tae-won, Hyundai Motor Group Chairman Chung Eui-sun, and LG Group Chairman Koo Kwang-mo have all been listed as inside directors. Among them, Chairman Chung and Chairman Koo also serve as board chairs.

There is no issue with the articles of incorporation. Samsung Electronics’ board is composed of 3 to 14 members according to the articles of incorporation, and as of the third quarter of last year, there were 11 members including five inside directors such as Vice Chairman Han Jong-hee and six outside directors. Adding Chairman Lee as an inside director would not violate the articles of incorporation.

A business insider said, "I understand that Chairman Lee has had the intention to become a registered director since his promotion to chairman," adding, "With the resolution of judicial risks, he is expected to proceed with the registration process and realize responsible management."

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