Lee Kun-hee reinstated as Samsung Electronics chairman

Posted on : 2010-03-25 11:30 KST Modified on : 2019-10-19 20:29 KST
The early return has stunned observers following Lee’s court conviction, special pardon from President Lee Myung-bak
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The Samsung Group, citing a “management crisis,” announced Wednesday that former chairman Lee Kun-hee is returning to the front lines of management as chairman of Samsung Electronics, the flagship subsidiary of Samsung Group. His return comes twenty-three months after he announced to the people that he was stepping down on April 22, 2008, taking responsibility for the creation of a political slush fund. Lee Kun-hee was found guilty of tax evasion and given a suspended three-year prison sentence, however, President Lee Myung-bak granted him a special pardon on Dec. 31, 2009.

The dominant view among observers was that Lee’s return was a matter of time after the Lee Myung-bak administration’s special pardon and exoneration in late 2009. However, the timing of his return came far sooner than expected. Previously, many including those within Samsung held the cautious view that his return would come after the June regional elections at the earliest.

Reasons for this included the need for him to appear to be focusing on winning a Winter Olympics bid for PyeongChang, widely cited as the reason he received a special pardon from President Lee, as well as the burden of charges of preferential treatment following his pardon and exoneration. Lee himself dismissed the possibility of an early return during a Jan. 10 multimedia home appliance show in the U.S., when he said, “It is still a long way off,” and at a 100th anniversary ceremony for the birth of Samsung founder Lee Byung-chul on Feb. 5, when he said, “It is still too soon.”

It was confirmed Sunday, however, that Samsung had been pushing for Lee’s return to management for at least a month. A senior executive there said, “The chief executives’ council discussed Mr. Lee’s return to management on Feb. 17 and 24, and after communicating their wishes through Samsung Life Chairman Lee Soo-bin, they obtained his consent.”

The reason given for Lee’s early return was “crisis concerns.” Rhee In-yong, Samsung’s chief communication officer and executive vice president, said, “In order to preemptively seize business opportunities in a situation where uncertainty is deepening in the economy and the management environment is rapidly changing, Mr. Lee’s wisdom and experience are urgently needed.” In particular, Samsung mentioned the Toyota affair, which erupted at just the right moment to show that even a top global company can come crashing down in an instant.

In accepting the position of chairman, Lee Kun-hee said, “We are now facing a real crisis. We do not know what will come of Samsung or when. We must start again. We have no time for hesitation. Let us move forward looking only ahead.”

Common sense dictates that strong leadership is demanded amid a greater degree of management uncertainty. Since Samsung is declaring independent management by affiliates on one hand while effectively maintaining the group system on the other, it is undesirable for the vagueness of the situation to persist into the long term. Along these lines, economic groups such as the Federation of Korean Industries unanimously issued statements of support regarding Lee’s return to management.

Lee’s return, however, appears highly unlikely to overcome the crisis. Experts located the essence of Toyota’s crisis in the company’s “closed management,” where the lack of proper communication with society is not limited to simple issues of product quality. It is difficult to detect any traces of efforts to communicate with society in the matter of Lee’s return to management, which is expected to generate social controversy. Kim Sang-jo, professor of Hansung University and director of Solidarity for Economic Reform (SER), warned, “The lack of communication with the market manifested in the process of Lee’s decision to return to management could increase Samsung’s crisis risk in the future.”

The implementation of promised management reforms announced by Samsung two years ago was cited as a necessary precondition for Lee’s return. However, many observers are noting that of the ten promised reforms, the only ones implemented to date have been in minor areas. Indeed, Lee’s method of returning to management has been counter to the path of reform.

The chief ill effect of the conglomerate power structure has been that the head wields absolute power while taking none of the corresponding responsibility. While Lee has taken over the position of chairman of Samsung Electronics, he is not a member of the board of directors, the company’s formal decision-making body, and so he does not have to take any responsibility for major decisions.

Kim Jin-bang, professor of Inha University and chairman of the People’s Economic Committee of the People’s Solidarity for Participatory Democracy (PSPD), said, “Lee said he was stepping down and then reversed the decision, and it appears he has also overturned everything he said indicating that there would be a move toward a new management system after the slush fund incident.” Professor Kim added, “It sounds like he is saying he will continue the imperial management system.”

Please direct questions or comments to [englishhani@hani.co.kr]

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