Samsung "emperor's" departure paves way for son: Analysts
The dramatic resignation of Samsung chairman Lee Kun-Hee paves the way for corporate reforms and his son's eventual takeover of South Korea's largest business group, analysts said on Wednesday.
By Agencies |
SEOUL: The dramatic resignation of Samsung chairman Lee Kun-Hee paves the way for corporate reforms and his son's eventual takeover of South Korea's largest business group, analysts said on Wednesday.
"Samsung will have a new, young emperor but his grip on the group will be much less than his grandfather and father," Professor Kim Ky-Won of Korea National Open University told the media.
Lee, who faces tax evasion and breach of trust charges after a probe into alleged corruption at the group, on Tuesday announced his shock departure after 20 years at the helm.
Samsung said it would scrap the strategic planning office accused of helping the 66-year-old chairman manage his hidden assets and illicitly transfer control of management to his 39-year-old son Lee Jae-Yong.
The group said Lee senior does not believe Jae-Yong is ready yet to take over. The son will leave his executive job at group flagship Samsung Electronics and work on expanding business in emerging markets.
The group said no new chairman would immediately be appointed and subsidiaries would be given greater freedom to make decisions.
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"We can't rule out a temporary leadership vacuum," said Jeong Eui-Suck at Good Morning Shinhan Securities. He noted that key decisions, especially major investment plans, had formerly been made by the chairman and the strategic planning office. "There will maybe be delays in decision-making concerning large-scale investment."
Seo Young-Soo at Kium Securities said the reform plans are likely to enhance "the strength of the group's corporate governance structure rather than lead to its disintegration."
Seo said the group is highly likely to be reorganised around Samsung Life and Samsung Fire and Marine Insurance, which would jointly play a role as a de facto holding company.
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As with other such Korean groups, Samsung subsidiaries are linked by a complex chain of cross-shareholdings which allow the founding family to retain control with relatively small shareholdings. Samsung Everland, a theme park operator, controls Samsung Life which in turn is the single biggest shareholder in Samsung Electronics.
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Everland, an unlisted company, is owned by the junior Lee following the controversial issuance of cheap convertible bonds in the 1990s -- the subject of the breach of trust charges against Lee senior. "Jae-Yong, the largest shareholder in Everland, will ultimately come back in five years or so when public resentment against the father-to-son succession eases and a revamp in corporate governance is completed," said Jeong.
Kim of Korea National Open University said the senior Lee's departure was aimed at paving the way for the son's succession and avoiding a heavy sentence when his own case comes to trial.
He said Samsung Life must be separated from the conglomerate if it is to be thoroughly reformed.
"Samsung Life, whose profit comes from clients' money, must be cut out of the system of control over the group," Kim said.
He suggested that Samsung Everland, the Lees and their associates should divest from Samsung Life and then increase their holdings in the electronics unit.
"That way, Samsung Life would become an independent unit and Samsung Electronics would be better protected (from hostile takeover attempts)," he said.
Shares of several major units were lower Wednesday, with Samsung Electronics shedding 3.3 percent, Samsung SDI falling 1.1 percent and Samsung C and T Corp losing 2.1 percent.
Samsung Heavy industries climbed 3.7 percent. Analysts said the falls were more related to profit-taking than concerns over the leadership change. Some believe Lee's departure will not cause havoc among units and may even provide positive momentum by ensuring more independence.
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