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Samsung Group Vice Chairman Lee Jae-yong is led away to the prison bus after receiving a five year prison sentence on various bribery and corruption charges from the Seoul Central District Court on Aug. 25. (Photo Pool)

With Samsung Electronics Vice Chairman Lee Jae-yong having received a five year sentence in his recent trial, there is a great deal of interest regarding who will lead Samsung Group – which brings in nearly 300 trillion won (about US $270 billion) in annual sales – in his stead. The previous leadership triumvirate, comprised of the (Vice) Chairman, the Future Strategy Office (FSO), and a meeting of group affiliate presidents, have all been either jailed or dissolved following the Choi Soon-sil scandal.

On Aug. 27, a senior Samsung staff member said that, "It's untrue that Samsung entered into an emergency management system...as we’ve said in the February reform plan, Samsung affiliates are following an independent management system, centered around their respective board of directors." He added that there have been no moves to establish a new body to support a possible "jail cell management" scenario, or to announce another reform plan. Within Samsung, there are fears that creating a second "control tower” might prompt public criticism that could be harmful to the upcoming appellate trial, especially in light of the recent disbandment of the FSO.

For the time being, it appears that Samsung Group will be managed around the three major affiliates: Samsung Electronics, Samsung C&T and Samsung Life. Such a "small group" system is one where Samsung Electronics oversees smaller affiliates in its sector, such as Samsung SDI, Samsung Electro-Mechanics, and Samsung SDS. In the construction industry, Samsung C&T would manage Samsung Heavy Industries and Samsung Engineering, while Samsung Life would supervise finance affiliates like Samsung Fire & Marine Insurance and Samsung Card.

In fact, when the FSO was disbanded last March, most of the key personnel -- excluding those who left the company -- were reassigned to Samsung Electronics and Samsung C&T. Flagship Samsung Electronics generates most of the group's revenue, and Samsung C&T, which holds a significant stake in Samsung Electronics, is the cornerstone in the group’s ownership structure. The remaining executives were appointed to Samsung SDS or Samsung Life.

A noteworthy figure is Samsung Electronics CFO and President Lee Sang-hoon. The former head of Strategy Team 1 in the FSO, Lee is said to be highly trusted by Lee Jae-yong. At Samsung Electronics, CEOs like Vice Chairman Kwon Oh-hyun and President Shin Jong-kyun run the group’s semiconductor and mobile businesses, while Lee Sang-hoon is tasked with making big strategic decisions at Samsung Electronics as well as relevant affiliates. President Rhee In-yong, who handles the public relations division at Samsung Electronics, is also said to have Lee Jae-yong’s trust.

Outside of Samsung, former FSO Human Resource Team head and President Chung Hyun-ho is also said to be deeply trusted by Lee Jae-yong. Before the disbandment of the FSO, Chung was seen as a candidate to take over the director’s role of the FSO. Others say that Lee Jong-wang, the former Samsung Electronics Legal Team head who made frequent appearances at Lee Jae-yong’s trial, could play a “messenger” role.

One business administration professor, who has studied Samsung Group extensively, speculated: “There is a chance that, despite the disbandment of the Future Strategy Office, all of the key people will be playing their roles from wherever they are. Human Resources management, auditing and financial administration functions are necessary in order to run so many companies, and these can be managed by three separate small groups. Although it’s been weakened, the chain of command that ultimately reports to vice chairman Lee will not disappear.”

By Lee-wan, staff reporter

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