The online edition of the Financial Times reported on October 1 that Samsung Electronics’ Vice Chairman Lee Jae-yong is facing a tough test with corporate succession on the horizon. According to the Financial Times, Samsung Group chairman Lee Kun-hee, who headed the company for 26 years, promoted his only son to the position last month to signal the succession.
With the current chairman at the helm, Samsung has dominated the global memory semiconductor and TV markets. In addition, it has emerged as a powerhouse in the mobile phone market. No less than 246,000 employees are working for the company whose wide scope of business ranges from construction to life insurance. Still, it is Samsung Electronics, one of the most tech-oriented companies in the world, at the center of it.
However, the stock price of Samsung Electronics has declined 11% since June this year due to investors’ concerns over the profitability of its smartphone products and the possibility of its sustainable growth. Investors are casting doubts on whether or not the tech giant will be able to continue its stellar growth under the leadership of the heir apparent.
It is well known that the current chairman ordered his employees to burn all of the thousands of its sub-standard handsets during the early stage of its mobile phone business. Also famous is his Frankfurt declaration at the Kempinski Hotel back in June 1993. At that time, he told his 200 or so top management members to change everything but their wives and kids. It is said to be the speech that gave rise to what is now Samsung.
He was involved in a corruption scandal and resigned in 2008, but came back two years later. Samsung recorded substantial growth even during his absence. It is this very point that makes it hard for many investors to determine whether or not Samsung’s success as of late should be attributed to the chairman’s management abilities or those of its executive members, who are considered to be the most excellent and the most ambitious in Korea. “The Samsung Group has established a platform for the past 20 years on which professional managers can make decisions in a very organized way, and this is how it is different from Apple,” said Marcello Ahn, fund manager at Quad Investment Management.
These days, many insiders are focusing on how capable Vice Chairman Lee Jae-yong will be in leading the group. Aged 45 this year, he is known to be much more outgoing than his father. He studied at Keio University and Harvard Business School, and is good at both English and Japanese.
He started his official career in Samsung as a Chief Customer Officer (CCO). In 2007, when he took the position, not a few people were cynical about the appointment because they regarded it as a trivial job. However, he utilized his position to meet regularly with the late Steve Jobs, and became the only Asian entrepreneur who was invited to the memorial ceremony for the late founder of Apple two years ago.
Although Samsung Electronics and Apple are engaged in a series of lawsuits concerning smartphone patents, Apple is still one of the major customers of the components and parts manufactured by Samsung. The vice chairman’s wide human networks built during his CCO days are now contributing greatly to the Samsung Group’s global business with component suppliers and business partners. Samsung’s smart TV business clearly shows that it is not just about manufacturing TV sets, but about fostering partnerships with content providers. The second-in-command’s personal connections in the political community and the government of the United States have been a boon to the company’s local smart TV business supported by Amazon, Netflix, Verizon, and many more.
Some people criticize the family of the owner for trying to keep management rights with less than 5% of the shares of Samsung Electronics. Others claim that what the Vice Chairman can and cannot do should be found out first. However, those in the know say that vice chairman Lee Jae-yong has made great contributions to the success of the Galaxy series smartphones, and thus such criticisms are ill-founded.
“It is hard to criticize the way Samsung does business because it has yielded good results,” said Jonathan Pines, who leads the Emerging Asia strategy at Hermes Fund Managers. He added, “Nonetheless, investors are predicting the next move like in a chess game.”