"Crisis Surrounding Samsung... Will Lee Jae-yong Return as a Registered Director in His Second Year as Chairman?"

[Korea Financial Times, Kim JaeHun] As Samsung Electronics faces discussions of a crisis, there's growing speculation about Chairman Lee Jae-yong's possible return as a registered director in his second year since taking office. Chairman Lee stepped down from his position as an internal director in 2019 and hasn't returned to the board since. However, with Samsung Electronics facing various internal and external challenges this year, there's increasing interest in Lee's next moves as calls grow for owner-led responsible management.

According to industry sources, Samsung Electronics is not planning any special events or messages for Chairman Lee's second anniversary on the 27th. This is interpreted as a focus on internal restructuring given the uncertain internal and external situation. Samsung Electronics also didn't hold any special events for Chairman Lee's first anniversary last year, considering various factors including poor performance in the semiconductor division.

Lee Jae-yong also did not comment much on the recent crisis surrounding Samsung Electronics at an event organized by Seoul National University Hospital on the 21st called “Lee Kun-hee's Project to Overcome Pediatric Cancer and Rare Diseases.
This year, Samsung Electronics is facing the biggest crisis in its history. The company is particularly struggling in the memory semiconductor sector, especially in the competition for AI-focused HBM (High Bandwidth Memory), and its ambitious foundry business is losing market share to global leader TSMC.

According to Samsung Electronics' preliminary Q3 2023 results released on the 8th, the company recorded consolidated revenue of KRW 79 trillion and operating profit of 9.1 trillion won. While revenue increased 6.66% quarter-over-quarter, operating profit decreased 12.84%, falling below market expectations.

Jeon Young-hyun, vice chairman of Samsung Electronics' semiconductor division, also issued an unusual apology shortly after the preliminary results were announced, saying, “The results fell short of market expectations, causing us to worry about our fundamental technological competitiveness and the future of the company.”


Samsung Electronics is concerned not only about its sluggish performance but also internally about cooperation between labor and management due to expanded union activities. Recently, Samsung Group's ultra-company labor union, which includes labor unions of five Samsung affiliates, requested its management, including Chairman Lee Jae-yong, to improve personnel management system and compensation for performance.
As Samsung Electronics is engulfed in internal and external crises, Chairman Lee Jae-yong's drastic personnel innovation as well as the possibility of returning to the registered director for participatory management are being carefully raised. Chairman Lee Jae-yong stepped down as an inside director without re-election in 2019 after being restricted from management activities due to his involvement in the state affairs manipulation scandal when he was vice chairman. Although he was expected to return to the registered director after being pardoned as a special envoy for Liberation Day in 2022, the return to the board of directors is being delayed again due to the trial on the merger of Samsung C&T and Cheil Industries that occurred during the succession process.

Having a member of the owner's family on the board of directors of a company is a measure to make quick and bold decisions, including large-scale investments. In particular, it has been argued that Samsung Electronics, which allowed SK Hynix to catch up in the HBM sector, missed the right time to invest due to the absence of Chairman Lee Jae-yong, the top decision-maker. There have been no major M&As to revitalize the company since its 2017 acquisition of Hamann, an electronics company led by Lee Jae-yong.

The registration of the head as a registered director demonstrates his commitment to responsible management by taking legal responsibility for various internal and external risks. Currently, Chairman Lee Jae-yong is the only unregistered director among the heads of Korean conglomerates, including Samsung Electronics, SK Group, Hyundai Motor Group, and LG Group.

Earlier this year, Lee was acquitted in the first trial of his management succession case, raising the possibility of his return as a registered director. However, there was no proposal to re-register Lee Jae-yong as a registered director at the general shareholders' meeting in March this year. It is analyzed that the company has taken a cautious stance on his reinstatement as it will take about 1-2 years for the final sentencing.
While the succession-related judicial risk is still ongoing, Samsung Electronics' sense of crisis has increased this year, and calls for Lee's return as a registered director have been growing. This is because the company needs bold investments to get out of the crisis and leadership for labor-management cooperation.

In particular, Samsung's Compliance & Surveillance Committee recently cited the need to reinstate Lee Jae-yong as a registered director to practice responsible management and serve as a management control tower.

Lee Chan-hee, chairman of Samsung's compliance committee, had previously been reticent or reserved about the return of Lee Jae-yong as a registered director, but his stance has recently changed. The Compliance Committee is an external monitoring organization that was established to ensure the group's responsible management and compliance after the NSC scandal.

“It's called a judicial risk, but until the outcome of the trial, it's right for Chairman Lee Jae-yong to return as a registered director and do his best for responsible management,” Lee Chan-hee, chairman of the Compliance Committee, told reporters before the committee's regular meeting at Samsung Life's Seocho office in Seoul on the morning of the 18th.

Earlier on the 15th, he emphasized, "As Samsung Electronics is in a very difficult situation, there should be improvements such as rebuilding the control tower and the return of the CEO to the registered executive."

Kim JaeHun (rlqm93@fntimes.com)