Wednesday, 4 August 2010

lee han shih

Lee Han Shih is the founder, publisher and editor of asia! Magazine.


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Samsung's Strength
December 12, 2008
Special to asia!

Next year the Samsung group will celebrate its 70th anniversary. Barring snags, it will also celebrate the ascension of the third generation of the founding Lee family to its helm.

Like the Rockefellers of America and the Wallenbergs of Sweden, the Lees are business royalty in South Korea. Founded by Lee Byung-chul in 1938 as a small exporter of fruit and dried fish, Samsung expanded tremendously during two periods, the 1960s and the 1970s in heavy industries and low cost manufacturing during Korea’s industrial boom; and the 1990s and early 2000s in electronics and semiconductors, of which it has become the global leader in many areas.

The founder, Lee Byung-chul, presided over the first expansion.

The current chairman, Lee Kun-hee, made possible the second expansion when he moved Samsung away from competing on quantity to competing on quality. The third son of the founder who took over in 1987, Kun-hee famously told employees that they had to shift totally their way of thinking to survive. "Change everything but your wife and kids," he commanded them. It has worked. Samsung today has tremendous brand value, having overtaken Sony, its erstwhile role model, in innovation and market value.

Now the time has come for a third generation to mastermind a third phase of expansion. Those within Samsung, and a large part of the Korean business elite hold this opinion. (There is, of course, opposition from proponents of corporate governance who see conflict of interest in family-run chaebols or large conglomerates. But in Korea’s clubby environment where regulators and tycoons often mix together, their opinions hardly count.)

Kun-hee, 65, who suffers from recurrent illnesses including cancer, is planning to pass the torch to his only son, Jae-yong.

Tall, handsome and approachable where his dad is aloof and keeps a low profile, Jae-yong, 38, had a comprehensive education. He took his first degree in Korea, a post graduate degree in Japan and enrolled as a doctoral candidate at Harvard, where he was pulled out to run Samsung’s e-business during the boom.

Today he is a managing director of Samsung Electronics, the family crown jewel, and is seen in places where it matters, such as showing Rupert Murdoch around during the Las Vegas consumer electronics show and talking to reporters about the future of the company.

By all accounts, he is nice where his father—generally known as "The Emperor"—is nasty. He is also bright and fast on his feet. Whether these are the qualities that will bring Samsung to the next stage of growth is hard to say. But Jae-yong does have a very strong incentive to make Samsung even bigger. Under a convoluted web of cross ownership, Jae-yong is the 25% owner of Samsung Everland, the de facto holding company of the group. This makes him the biggest shareholder—some might say owner—of Samsung. As owner, it is now Jae-yong’s job to bring the group out of its latest scandal. Samsung was a member of an international consortium which fixed the price of semiconductors. Samsung was fined US$300 million.

And if Jae-yong is to take over as the third generation leader, he must also separate family affairs from that of Samsung, a distinction his father fails to grasp. Two years ago, Samsung was forced to lie on behalf of the Lee family when Kun-hee’s third daughter, a pretty girl of 26 called Yoon-hyung, committed suicide in New York by hanging herself on an electric cord after her father refused to allow her to marry the man she loved. Samsung told the press she died in a car crash and eventually had to apologise for misleading the public. Investors took it in their stride, but they may not be as tolerant if a similar incident takes place in the future.