Chairman Health Risk
Samsung Group chairman Lee Kun-hee was rushed to the emergency room due to acute shortness of breath on the night of May 10. Under the circumstances, his sudden health problems are likely to pose the most significant risk in the corporate succession process and the group’s Mach Management drive, which is taking the form of the reshaping of the Future Strategy Office and business reorganization.
According to Samsung Medical Center, he suffered a sudden heart attack on May 10 and was carried to the emergency room for CPR and other operations before being moved to the convalescent ward. This is the first time that he received CPR for heart attack symptoms, although he received some medical treatments in the past for respiratory problems. In addition, he was moved first to Soonchunhyang University Hospital near his home, not Samsung Medical Center, which illustrates the urgency of the situation.
The chairman is 72 years old now. He underwent lung cancer surgery in the United States in the late 1990s, and concerns over his health have been posed regularly since then. He has spent winters abroad since that time in countries with warm winter climates, in order to prevent the recurrence of the disease. This year, he was out of Korea for about three months between early January, right after the group’s New Year’s Ceremony, and April 17.
Chairman Lee has suffered from various other illnesses as well. For example, in August last year, he stayed in Samsung Medical Center for 10 days as his cold led to pneumonia symptoms. In March 2009, he received four days of medical treatment due to bronchitis, and was hospitalized for over a week for flu in January 2008. Samsung also had to postpone a banquet commemorating the 20th anniversary of the declaration of New Management due to his pneumonia last year. His health problems have added to the uncertainties on the part of the entire Samsung Group on repeated occasions in this way.
The ambitious Mach Management drive of the group is likely to be affected by the hospitalization as of late, too. Since his return to Korea on April 17, he met its executive members at the main office building in Seocho-dong every Tuesday to be briefed on major issues and set business directions in person. These days, the Samsung Group is moving to speed up its business reorganization and seek new growth opportunities in the framework of Mach Management, focusing on high-intensity innovation. It is in this context that he reassigned the managers of the Future Strategy Office, which can be compared to the control tower of the group, immediately after his return, and announced the listing of Samsung SDS on May 8 of this year.
However, the overall processes are expected to be hindered at least to some extent by his health problems. “The first aid was faultless, like the operation at the Samsung Medical Center, and we are looking forward to a smooth recovery,” a Samsung representative explained, but it appears to be difficult for the chairman himself to take care of major issues for a while.
With the situation as it is, much attention is being paid to the Samsung Group’s subsidiary and ownership restructuring process. Samsung has accelerated business reorganization since the second half of last year by spinning off the fashion business unit of Cheil Industries to Samsung Everland, which functions as the de facto holding company of the group, and merging Cheil Industries with Samsung SDI. Then, it consolidated Samsung SNS with Samsung SDS and sold Samsung Corning Precision Materials to Corning, while combining Samsung General Chemicals with Samsung Petrochemicals.
More recently, it began to restructure its financial subsidiaries such as Samsung Securities and Samsung Life Insurance. The Samsung Life Insurance shares owned by non-banking affiliates like Samsung Electro-Mechanics, Samsung Fine Chemicals, Samsung SDS, and Cheil Industries have been disposed of while Samsung Life Insurance is gathering the shares of its financial subsidiaries such as Samsung Fire Insurance and Samsung Asset Management.
Samsung SDS, whose shares are owned by the chairman and his family members, is planned to be listed before the end of this year. Industry insiders’ consensus is that this has to do with the third-generation ownership of the group. According to them, Samsung SDS is likely to play the most important role along with Samsung Everland in the succession process. Samsung Electronics Vice Chairman Lee Jae-yong, Hotel Shilla President Lee Bu-jin, and Samsung Everland President Lee Seo-hyeon own 11.25 percent, 3.90 percent and 3.90 percent of the shares of Samsung SDS as of now.
In the meantime, some of them point out that the business reorganization and the removal of cross-shareholding that started last year are not just measures for Mach Management, but a kind of groundwork for third-generation ownership to protect against the health problems. “Such moves are sure to enhance the competitiveness of the Samsung Group’s business as explained by itself, but may also allow for the possible changes in the way of business derived from the chairman’s health conditions,” said one of them.
This is why most of them predict that the reorganization will gain speed down the road before his conditions are further exacerbated. It is said that the announcement of listing of Samsung SDS within this year will result in a faster restructuring of the heavy industry, construction and financial arms. At the same time, inter-subsidiary share sale and exchange for the removal of circular equity investment and the conversion of Samsung Everland into a holding company are forecast to be accelerated.