Lee Jae-yong, Freed from the 'Management Shackles,' Stretches Toward the 'New Samsung' (Comprehensive)

Samsung Electronics Chairman Lee Jae-yong is drawing attention as he speeds up his management moves toward a "New Samsung Lee Jae-yong style" by lifting the "management shackles" that had tied him down for about nine years. On the 5th, the court acquitted him of all charges of 'unfair merger and accounting fraud,' temporarily resolving his judicial risks. Although there remains a possibility of a second trial due to the prosecution's appeal, until the trial fully proceeds, he is free from the constraints of the trial and can engage in unrestricted management activities. Earlier this year, Lee visited Samsung Research and emphasized to employees, "Let's challenge more boldly and fiercely," and it appears he will now put this message into action. The business community expects that he will kickstart large-scale investments and mergers and acquisitions (M&A) to discover future growth engines for Samsung, shaking off the withdrawn posture from the beginning of the year and stretching toward building the "New Samsung."

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

With no trial variables, Lee Jae-yong likely to broaden his steps

The acquittal is significant as it not only improves Lee's external image but also expands his room for maneuver. Until now, Lee found it difficult to schedule overseas business trips due to court hearings twice a week. To compete with global companies rivaling Samsung, he needed to go out into the world market, see things firsthand, and meet key figures to seek new opportunities, but he was unable to do so properly.

Even earlier this year, Lee handled his schedule only within Korea. He did not attend the International Consumer Electronics Show (CES 2024) held in Las Vegas, USA, from January 7 to 10, nor the World Economic Forum (Davos Forum) held in Davos, Switzerland, from January 15 to 19. Instead, on January 10, he visited Samsung Research in Umyeon-dong, Seocho-gu, Seoul, to review trends and countermeasures in next-generation communication technologies, including 6G. Then, on January 16, he communicated with 15 "2024 Samsung Masters" at the Seocho headquarters.

The shackles of judicial risk also made meetings with key figures difficult. On January 26, Lee was unable to meet Sam Altman, CEO of OpenAI, who visited Korea. Altman had initially requested a meeting with Lee, but due to the upcoming first trial verdict and scheduling uncertainties, the meeting did not materialize. Instead, Altman toured Samsung Electronics' semiconductor plant in Pyeongtaek, Gyeonggi Province, and met with Samsung Electronics Semiconductor Division (DS) President Kyung Kye-hyun.

However, the situation changed with the acquittal that day. Lee's scope of action is expected to widen. He is likely to focus on domestic issues for the time being while reviewing plans for overseas trips. Some in the business community suggest that Lee may board a plane abroad at the end of this month or early next month.

Expectations rise for acceleration of large-scale M&A and new technology investments

Overseas trips are likely to lead to large-scale investments and major M&A. The industry believes that for Samsung Electronics to secure a super-gap technological competitiveness not only in semiconductors but also in artificial intelligence (AI), 6th generation mobile communications (6G), and bio sectors?future growth engines?generous investment is essential. Lee emphasized at Samsung Research, his first move of the new year, "Our survival and future depend on securing new technologies. In difficult times, proactive research and development (R&D) and unwavering investment are necessary."

Previously, after becoming vice chairman in 2012 and before the 2016 political scandal, Lee focused on M&A to expand new businesses. A representative M&A achievement is "SmartThings," established through the acquisition of related companies in 2014 as a hub for Samsung's device ecosystem.

Samsung Electronics Seocho Building, Seocho-gu, Seoul. Photo by Jinhyung Kang aymsdream@

"Harman," a Samsung Electronics subsidiary recently achieving results in the automotive electronics business, was acquired by Samsung Electronics in 2016 for about $8 billion. Samsung Pay, a mobile payment system, secured its foundational technology when Samsung Electronics acquired the U.S. mobile payment solution company LoopPay in 2015. Samsung's AI assistant "Bixby" was also launched after Samsung Electronics acquired a related company in 2016 and secured the underlying technology.

Attention is also focused on whether large-scale investment plans will be announced. Lee previously announced a mega-investment plan to invest 240 trillion won over three years immediately after his release on parole in August 2021. The market increasingly voices that Samsung Electronics must achieve results not only in semiconductors but also in new business areas such as AI, robotics, 6G, bio, and automotive electronics. As of the end of the fourth quarter last year, Samsung Electronics had 92.42 trillion won in cash and cash equivalents.

Speeding up responsible management... 'JY Board' expected to be completed at March shareholders' meeting

With Lee shaking off judicial risks, attention is also focused on whether he will return as a registered director at the shareholders' meeting scheduled for next month. Returning as a registered director would publicly demonstrate his commitment to responsible management and could accelerate the steps toward completing the "Lee Jae-yong Board" and the "New Samsung."

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

Registered directors and unregistered executives differ in whether they can participate in the board of directors, which discusses key company decisions. Registered directors are included as board members, but unregistered executives are not. They are also excluded from penalties under laws such as the Serious Accidents Punishment Act. This has led to criticism that if the head of a conglomerate family is an unregistered executive, they have authority but no responsibility.

In the business community, voices are emerging that for Lee to actively manage by deciding on large-scale M&A and investments and taking responsibility, he needs to become a registered director. There is no problem under the articles of incorporation. Samsung Electronics' board consists of 3 to 14 members according to the articles of incorporation, and as of the third quarter last year, there were 11 members: five inside directors including Vice Chairman Han Jong-hee and six outside directors. Adding Lee Jae-yong as an inside director would not violate the articles of incorporation.

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