Huge Personnel Change at Samsung

Lee Jae-yong, heir-apparent of Samsung Group, to be appointed president; the group¡¯s management control tower to be reinstated to explore growth engines

The Samsung Group will soon conduct a massive year-end reshuffle in which Lee Jae-yong, the sole son and heir-apparent of Samsung Group owner Lee Kun-hee, will be promoted to president of Samsung Electronics, a move bringing the junior Lee closer to the helm of the nation¡¯s biggest conglomerate.
The 68-year-old senior Lee confirmed the promotion of the junior Lee, 42, now executive vice president and chief operating officer (COO) of Samsung Electronics, during a meeting with reporters at Incheon International Airport recently while returning from a trip to the Guangzhou Asian Games from Nov. 11-17. It heralds a massive personnel change of the group to establish a new management hierarchy, tapping new, younger executives in place of the senior Lee¡¯s long-standing ¡°old guard.¡±
The senior Lee will likely infuse young blood into the management hierarchy of Samsung Electronics, the flagship company of the conglomerate, and other subsidiaries, just as he did 17 years ago, business officials familiar to the matter said. At that time, Lee conducted an extraordinary reshuffle tapping Hyun Myung-gwan, a young, talented figure from the Board of Audit and Inspection, as his chief of staff in 1993, accepting management pillars on the ¡°Pursuance of New Management,¡± reshuffling his senior secretariat officials with scores of young president-class executives with international experience.
The senior Lee, now 23 at the helm at the conglomerate, has hinted at tremendous changes in the management landscape of Samsung Electronics and other affiliates as he has repeatedly made remarks stressing that Samsung Group has prepared for the changes of the 21st century over the past decade, but not quite sufficiently to brace for the upcoming challenges and changes that will unfold in the years to come. Beginning a few years ago, he began to touch on businesses focusing on creative management and software, but Samsung Electronics and other sister companies have failed to come up with new creative items, still keeping their portfolios focusing on hardware.
Samsung Electronics Adviser Lee Hak-soo and Councilor Kim In-joo, who have been credited with growing Samsung electronics into a word-class company with Chairman Lee, have virtually resigned from their positions in a run-up to the upcoming year-end reshuffle.

In another sign of change, Chairman Lee has appointed Samsung Electronics Vice Chairman Kim Soon-taek, head of the electronics unit¡¯s team devoted to pursuing new business areas, to become the chief of the group¡¯s reinstated management control tower unit, a kind of successor to the now-defunct Strategic Planning Office. Samsung Group disbanded its Strategic Planning Office in 2008 when Chairman Lee stepped down following an independent counsel probe that charged him with bond transaction and tax law violations. He returned to the helm of the group as chairman this past March after he was given a special pardon by President Lee Myung-bak last December.
The group¡¯s new control tower unit, headed by Vice Chairman Kim, will be reportedly charged with exploring brand-new businesses on top of the responsibilities of the former Strategic Planning Office. Executive Vice President Kim Tae-hwan, who has worked as head of a new business team with Vice Chairman Kim will likely be moved to the management control tower unit along with senior officials charged with exploring such growth engine business sectors as energy, pharmaceuticals and medical equipment. Asked about what he was told to do by Chairman Lee on the day he took office as chief of the new management control tower on Nov. 22 at the Samsung Group headquarters in Seocho-dong, Seoul, Vice Chairman Kim said the chairman stressed a focus on what is ahead and the development of gifted manpower. Kim¡¯s comment indicates the possibility that the upcoming management will be reshaped to attach priority on exploring new growth engines and unfolding a new future.
Kim confirmed that the new group management will be reorganized in a way to brace for the future rather than continue with the past and its business portfolios will comprise new business arenas and new growth engines.
When he returned to the helm of the group following a hiatus from management in March, Chairman Lee issued a warning against challenges facing the conglomerate, focusing on what is ahead. At that time, he floated a crisis theory that Samsung¡¯s global products could disappear in a decade. Kim said Chairman Lee has just given the message that ¡°we have to make a new start, there is no time to hang back and we must see what is ahead.¡±
The average age of the current CEOs of Samsung Electronics and other subsidiaries is 53.7, quite higher than that of the junior Lee, groomed to be the successor of Chairman Lee, so the exit of elder president-level executives is inevitable in the upcoming massive reshuffle. Young, right-hand men of the junior Lee, yet to be named publicly, are likely to be tapped in the new management line-up, business sources said. Many former CEOs of Samsung Electronics were graduates from the engineering department of Seoul National University, as the Korean electronics giant has grown into a global company.
Lee In-yong, executive vice president of communications at the group, said the inauguration of the new management control tower and the departure of Vice Chairman Lee Hak-su and Vice Chairman Kim In-joo are designed to make a new start toward the future.
He made it clear that Lee¡¯s exit as the group¡¯s number two man was a kind of reprimand against him. The 10-year period under Lee¡¯s stewardship had both upsides and downsides, and the latest reshuffle has terminated the era, a group official said.
Chairman Lee was quoted as saying repeatedly that Samsung has managed to post solid business performances from a ¡°small picture management perspective,¡± but he posed the question: ¡°What about in a bigger picture management perspective?¡± How can the company brace for a changing global business environment and secure new businesses and new products fitting into the 21st century.
The reality is that Samsung Electronics, now ranked first in the global IT sector, sees its mainstay items already in a growth phase, with TV sets, mobile phones and semiconductor products being challenged by foreign rivals. The business landscape of the global IT industry is impossible to predict, as shown by the Apple iPhone¡¯s brilliant performance that has routed the global electronics market.
The outgoing Vice Chairman Lee, who once headed the financing team of the group, was credited with playing a leading roles in the successful restructuring of the conglomerate during the 1997 Asian financial crisis. Unlike him, the newly installed vice chairman of the group¡¯s control tower spent most of his career responsible for auditing at the group¡¯s secretariat. Kim has been recognized for transforming Samsung SDI, a one-time Braun tube maker, into a future energy firm of OLED and rechargeable batteries.
Another point of focus is what position the junior Lee will take on as president. Words on the matter vary. The junior Lee is rumored to be in charge of the semiconductor, LCD or new business division while, some speculate that he will rise to the chief executive of Samsung Electronics. The most probable is that the junior Lee will head a new division -- LED, photovoltaic battery, automobile battery, bio pharmaceuticals or medical equipment. Samsung Electronics now owns a 50 percent stake in Samsung LED, and it is tapping the photovoltaic battery, automobile battery, bio pharmaceuticals and medical equipment fields independently or with Samsung Medical Center, and most of the new businesses, almost confirmed as future growth engines, take fewer business risks.
Also the subject of focus in the upcoming reshuffle is the promotion of the two daughters of the senior Lee -- Lee Bu-jin, executive director of the Hotel Shilla, and Lee Suh-hyun, executive director of Cheil Industries. The upcoming personnel shuffle will most likely be the beginning of spinning off the group¡¯s subsidiaries among the son and daughters of the senior Lee.
Words are also abundant on whether the senior Lee will assume the chairmanship of the Federation of Korean Industries, a lobbying group of large conglomerates, as part of efforts to expand his external activities. nw

Samsung Group Chairman Lee Kun-hee

Samsung Electronics Vice Chairman Kim Soon-taek, chief of Samsung Group¡¯s new management control tower

Samsung Executive Vice President Lee Jae-yong


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