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Lee Kun-hee's legacy

Why Samsung has the highest-paid CEOs

By Oct 27, 2020 (Gmt+09:00)

4 Min read

This is the second in a four-part series that will delve into Chairman Lee Kun-hee’s New Management initiative that charted Samsung's course in becoming the leading global brand it is today.

In early 2000, Samsung Group affiliate companies' chief executive officers gathered at a company conference to present their five- and ten-year roadmaps to Chairman Lee Kun-hee. After the three-hour presentation, Lee’s first comments were: “How do we know what will happen in five or 10 years when we can’t even predict tomorrow?”

Chairman Lee continued on: “Having big aspirations is important, but finding good talent is as important. Good talent will create a promising future in five years and in 10 years.”

Lee’s comments mirror his commitment to talent management as he was famously known for recruiting top talent based on his conviction that the key to becoming a global top-notch company relied on human resources.

Chairman Lee’s focus on talent paved the way for Samsung's rise as a global brand. The group housed 100,000 employees in 1987 when Lee was inaugurated as the chairman. Since then, the workforce has increased over fivefold to 520,000 employees. In 2018, and the group’s revenue leapt from 9.9 trillion won to 387 trillion won – by almost fortyfold.

Lee Kun-hee shakes hands with employees at the groundbreaking ceremony for Samsung Electronics' semiconductor line in 2011
Lee Kun-hee shakes hands with employees at the groundbreaking ceremony for Samsung Electronics' semiconductor line in 2011

GLOBAL TOP MANAGEMENT, 10-YEAR FORWARD VISION 

In 2011, Harvard Business Review credited Samsung’s regional specialist program as a vital component in the group’s successful globalization. Introduced in 1990, the program dispatched talented employees abroad to give them opportunities to learn about the country’s culture and language alongside building networks. The program required an average cost of 100 million won ($88,724) per person and to date, over 5,000 employees have gone through the program at a total expense of over 1 trillion won ($887.2 million).

Chairman Lee spearheaded the international specialist program on grounds that employees should have a global mindset to grow the company into a global brand. Lee's dedication to the program is underscored by the fact that it has gone uninterrupted since 1990, continuing even during the 1997 Korean financial crisis and the 2008 global financial crisis.

The vast amount of information accumulated by regional specialists served as a valuable foundation for Samsung when the group tapped into developed markets as well as emerging markets, including in Africa and South America. For example, an employee who was dispatched to Thailand in the 1990s fostered a relationship with the Prime Minister during his time at a local business school. This relationship played a pivotal role in Samsung’s expansion into Thailand in the mid-2000s.

Lee Kun-hee visits a Samsung site in Vietnam with his wife Hong Ra-hee (left of Lee) in 2012
Lee Kun-hee visits a Samsung site in Vietnam with his wife Hong Ra-hee (left of Lee) in 2012

ONE GENIUS WILL FEED TENS OF THOUSANDS OF PEOPLE

Chairman Lee frequently asked his chief executive officers: “How many core talents are you working with?” Securing top talent was Lee's life-long agenda and one of the most important tasks for the group's chief executive officers. Lee's push for finding good talent stemmed from his thoughts that a single genius would be able to feed tens of thousands of people in the 21st century.

Chairman Lee’s catchphrase was: “Ten top-level talents are better than one company, and 100 talents are better than 10 companies.”

Lee's close attention to recruiting and retaining core talent came into full force after he brought in Korean technicians from Intel and IBM and achieved great success in the semiconductor business. This was when Lee first-hand experienced the value that core talents brought to the company.

HANDSOME REWARDS FOR OUTSTANDING PERFORMANCE

Samsung Electronics is home to a relatively large pool of chief executives making over 10 billion won ($8.87 million) in annual salary, and each year the company is responsible for the country's highest-paid executive.

Former Samsung Electronics Vice President Shin Jong-kyun holds the title as the highest-paid executive based on quarterly performance, having received 9.6 billion won ($8.5 million) in the first quarter of 2014. As for annual salary, former chairman of Samsung Advanced Institute of Technology Kwon Oh-hyun’s record remains unbroken with a salary of 24.3 billion won in 2017.

Chairman Lee’s New Management initiative is behind the high salaries of the group's CEOs. One of Samsung's tools for success is to offer performance-based compensation, which guarantees the industry’s most competitive pay for top talent. Thanks to the handsome rewards, competition among internal executives is fierce, which helps to boost the group's productivity. 

In 1995, Chairman Lee shook things up by eradicating the conventional practice of hiring people largely on their academic background. Instead, the group's hiring qualifications became oriented toward talent and capability alone.

“Samsung’s entry qualification is not a fancy diploma, but a person’s talent. We will provide equal employment opportunities for people regardless of their academic background and once they get in, there will be no discrimination for promotions.”

Lee was also devoted to removing discrimination in the workplace. In 1995, Chairman Lee abolished uniforms for female employees and set up childcare facilities for working parents. His decision was backed by a philosophy that if people face discrimination it is a loss for companies, and for the country at large.

Write to Hyung-suk Song, Jeong-soo Hwang, Su-bin Lee at click@hankyung.com
Danbee Lee edited this article.
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