hankyoreh

Gyeonggi Province

“The past year was difficult for a number of reasons. The fact that all of you were able to perform well and become executives despite that shows just how talented you are. Let’s challenge ourselves even more this year.” -Lee Jae-yong, vice chairman of Samsung Electronics, during a dinner address for newly appointed executives this past January

Even though Lee Jae-yong is not a registered director and does not have a title that represents the entire Samsung Group, he is exercising management rights for the group.

Aside from time he spent studying abroad, Lee has been working for Samsung Electronics since he entered the company in 1991. But everything changed after Lee’s father and company chairman Lee Kun-hee collapsed from an acute myocardial infarction on May 10 of last year.

A year later, the elder Lee is still struggling to recover. While the father has been out of the picture, the son has been establishing himself as the group representative, with his name being mentioned not only in electronics, but in all of the major areas of businesses at the group, including finance and biotech.

The prevailing view has been ultimately it is only a matter of time before Lee is promoted to chairman. In regard to this, Samsung is planning to take symbolic measures this May to show that Lee is acting as the de facto CEO instead of promoting him to chairman, sources say.

Recently, Lee has been getting a lot of public exposure, with frequent trips abroad and a series of meetings with well-known figures. However, Lee has yet to achieve anything remarkable in his management of the company.

Samsung Electronics has also avoided making specific comments about the role that Lee played in the Galaxy S6 Edge, on which the company has hung its hopes of rallying profits. Even Lee has refrained from directly linking the phone to himself. When others called it the “Lee Jae-yong phone,” he said that it was the result of the executives’ efforts.

Nevertheless, it is generally acknowledged at Samsung that Lee is playing a key role in the management of the group. A Samsung executive explained this as being in line with the “harmony of owner leadership and a professional management system,” which was the hallmark of Lee Kun-hee’s management style.

While admitting that “owner leadership is not easy to specify,” a source, at Samsung said that Lee is “playing a decisive role.” One specific example of this role is investment for the Galaxy S6 Edge.

“Getting rid of the replaceable battery that had been part of the Galaxy line through the Galaxy S5 had been regarded as an advantage and switching to a metal material was not something that President Shin Jong-kyun could decide on his own. Lee‘s support was necessary to convert to a metal case, which involved making a 2 trillion won investment in 20,000 machines from Japan that cost 100 million won each,” the manager said. This implies that Lee’s decision has been important for big investments and major changes during his father‘s absence.

Jang Se-jin, professor at the KAIST College of Business, describes this as “confirmation” of the decisions made by professional managers. “Lee’s current position is to give confirmation when professional managers decide that it is necessary to acquire or merge with a foreign company,” Jang said.

Indeed, Lee is involved in management across the group. He attends, for example, the monthly meetings of presidents in the group‘s financial affiliates. “Lee regards electronics and finance as Samsung’s key businesses. He is working to build this core,” a source at Samsung said.

Lee is managing the company, but he communicates directly with the major affiliates, instead of receiving assistance from the Future Planning Office, the group’s “control tower,” as his father did. In other words, Lee holds authority, but the specific way in which he exercises that authority is not visible from the outside.

Despite this, in the year that Lee’s leadership has been in the spotlight, brisk changes have taken place at the company. There has been restructuring at numerous affiliates, and affiliates in the chemical and defense industries like Samsung Total Petrochemicals and Samsung Techwin have been sold to Hanwha.

“The most important stakeholders for Lee are the staff and management at the company,” said a source at Samsung Electronics. But the spate of changes is also prompting some to wonder whether Lee’s management approach is to sell off subsidiaries and lay off workers.

Over the past year, Lee has made few specific remarks about company management aside from what he said about “mobile etiquette.” For this reason, some think that it is still too early to draw conclusions about his leadership.

“We can’t conclude right away that the performance of the Galaxy S6 is due to the management of Lee Jae-yong. His management will have to be evaluated later when we can see the big picture,” a source at Samsung said.

May 7. (Blue House photo pool)

By Lee Jeong-hoon, staff reporter

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