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Samsung Group Reinforcing Self-Regulatory Management by Affiliates
One Year after Virtual Dismantlement
Samsung Group Reinforcing Self-Regulatory Management by Affiliates
  • By lsh
  • February 28, 2018, 00:00
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There is concern that the absence of Samsung’s control tower may weaken not only Samsung’s corporate competitiveness but also Korea’s national competitiveness.
There is concern that the absence of Samsung’s control tower may weaken not only Samsung’s corporate competitiveness but also Korea’s national competitiveness.

 

On February 28, Samsung Group will mark the one year anniversary of declaring its “virtual dismantlement” for self-regulatory management by affiliates.

Although there is concern that the Samsung Group will be put into a quagmire as its chairman was put behind bars and the Future Strategy Office, the control tower of the group, disappeared, it is generally said that the group rode out its darkest days thanks to good business performances led by Samsung Electronics.

However, some experts say that it will take some time for the Samsung Group to reach its complete normalization as internal and external negative factors are continuing to take place and vice chairman Lee Jae-yong, released from prison with a suspended sentence in the appellate court is unable to return to the management forefront yet.

According to the Korean business world on February 27, Samsung is reinforcing self-regulatory management by setting up three small group systems – the Electronics Affiliate Group, the Non-Electronics Affiliate Group including Samsung C&T and the Financial Affiliate Group such as Samsung Life Insurance after announcing a management reform plan at the end of February last year.

Samsung is still designated as a big business conglomerate led by chairman Lee Kun-hee and the group’s affiliates are still communicating with one another with Samsung Electronics front and center. But, most of chains in terms of management disappeared. To cite examples, there is no longer a "Wednesday meeting" of the presidents of the group’s affiliates and a brake was put to group-level work toward the government.

In addition, "I thought that chairman Lee Kun-hee ill in bed will be the last person to have the title of the Samsung Group chairman," Lee Jae-yong said during his trial. Thus, it is a prevailing view that fleet-type management in the past will hardly revive.  

Around the beginning of the year, experts say that in this connection, Samsung Electronics assembled the Business Support TF Team, Samsung E&C, EPC Competitiveness Reinforcement TF Team and Samsung Life, Financial Competitiveness Reinforcement TF Team in affiliate reorganization at the beginning of the year.

The move was construed as a policy to lay the foundations of an advanced corporate culture through management centered on the boards of directors, while adjusting business through TF teams within small groups.

However, some people in Korean business circles point out that there is a limit to such attempts when considering the unique culture of chaebol in Korea.

It is widely recognized that even if a top professional manager becomes the CEO of each affiliate, the final decision is made by the chairman of the group and the corporate governance structure is complex. This fact impedes complete self-regulatory management.

On top of that, there is concern that the absence of Samsung’s control tower may weaken not only Samsung’s corporate competitiveness but also Korea’s national competitiveness with increasing negative matters such as the new government’s will to reform chaebols, the investigation of the prosecution's investigations into the past governments’ wrongdoings based on the cozy relations between political and economic power and mounting trade pressure from the US and China.

"Although officials from the Future Strategy Office have been recently appointed as key members of affiliated companies, it will be quite difficult for them to have the same power as in the past," said a representative of the Korean business world. “Business structures preclude recently appointed leaders of TF teams from making decisions powerful than those made by CEOs."