Samsung Succession in Disarray as Lee Criminal Case Advances

Questions about who would step in to run South Korea’s biggest conglomerate in the aftermath are being raised as the long-orchestrated plan to cement Jay Y. Lee’s position atop Samsung Group may put him in jail instead.

He could be prompted to relinquish duties at the family business, as prosecutors are seeking Lee’s arrest on allegations including bribery and embezzlement and if the allegations are proven to be correct. In addition to a sister — hotel executive Lee Boo-jin, potential replacements include executives running key divisions of the dominant electronics business.

Lee is trying now to avoid the missteps that triggered his father’s two criminal convictions after spending years following his father’s footsteps to the chairman’s seat of Samsung Group. Just as executives from Hyundai Motor Co. and SK Group have done, it’s still possible Lee could return to the company later or even call the shots from behind bars even if the accusations against him involving South Korea’s president are proven in court.

“Chaebol executives have a history of managing from the jail, whether it be via lawyers or secretaries visiting them,” said Lee Kyung-mook, a professor at Seoul National University’s Graduate School of Business.

Another calamity for Lee, the vice chairman of Samsung Electronics Co., the largest maker of mobile devices is the potential arrest in the scandal surrounding President Park Geun-hye. Last year, after some devices burst into flames, the company pulled its Galaxy Note 7 smartphone off the shelves. The debacle cost Suwon-based Samsung a competitive advantage before Apple Inc. released its iPhone 7 models and an estimated $6 billion.

“It’s a perilous practice that a person can take over a company just because he or she was born to a successful father,” opposition lawmaker Park Yong-jin said. “The biggest problem with our economy is that people with unproven skills run its biggest companies.”

Depending on co-CEOs and other top managers to handle those responsibilities, Lee doesn’t play the role of day-to-day manager. But when it comes to decisions like the next big bets in technology or potential acquisitions, employees and shareholders depend on him to provide strategic guidance.

Officer Kwon Oh-hyun, a 64-year-old who leads the semiconductor and display businesses, and Samsung Electronics’ co-Chief Executive could be the replacement for Lee is he is imprisoned. Yoon Boo-keun, who heads the consumer-electronics unit encompassing TVs and appliances, is another candidate.

“He’s part of the trio with Lee and Kwon that has run Samsung Electronics,” said Park Ju-gun, president of Seoul-based corporate watchdog CEOSCORE. “Samsung could be run as if that trio were still intact.”

Chung Sun-sup, who runs corporate researcher Chaebul.com said that it also would be “natural” for Lee Kun-hee’s eldest daughter to be considered.

“Some speculate she could practically take over, but being a large shareholder doesn’t mean she could run a massive company like Samsung Electronics,” Chung said. “Realistically speaking, Kwon may be the one.”

In South Korea succeed fathers at the chaebol that dominate the economy and a daughter taking over Samsung would break with tradition.

“Lee’s sister may briefly take the reins, but there’s little chance she’d take over permanently given she has fewer shares in the firm than her brother,” the professor said.

(Adapted from Bloomberg)

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