Samsung Group to speed up corporate governance reform

Samsung Group, South Korea’s largest conglomerate, is expected to accelerate the restructuring of its corporate governance to help Vice Chairman Jay Y. Lee, whose right to work has been restored, stabilize management at the helm.

The Samsung Compliance Committee, an external independent body created to monitor the group’s ethics and compliance management, plans to discuss measures for corporate governance reforms and other measures as soon as Tuesday to propose key issues to Lee, the conglomerate’s de factor leader, according to industry sources.

The measures may include Lee’s promotion to chairman and him becoming a registered executive of Samsung Electronics Co., the world’s top maker of smartphones and memory chips, the sources said on Sunday.

The creation of the committee, founded in February 2020 at the recommendation of the court that handled his bribery case involving former Korean President Park Geun-hye, has led to Lee allowing labor unions and announcing that he will not hand over management to the family's next generation.

“Samsung must improve corporate governance to take off,” Samsung Compliance Committee Chairman Lee Chan-hee said in January. “We will propose reasonable solutions by listening to external experts’ advice and internal members’ opinions.”

SAMSUNG LIFE’S POTENTIAL SALE OF STAKE IN SAMSUNG ELEC.

The group has not separated its industrial and financial capital as requested by the country’s Fair Trade Commission to prevent conglomerates from using their financial affiliates as private coffers, as the founder’s family controls the entire group with a 31.9% stake in Samsung C&T Corp., the group's de facto holding company.

Lee and his family members are the largest shareholders of Samsung C&T, which holds a controlling stake in Samsung Life Insurance Co., the top shareholder of Samsung Electronics.

Samsung Life, the country’s top life insurer, needs to sell an 8.51% stake in Samsung Electronics, or 508.2 million shares, to follow the rule set by the country’s antitrust watchdog.

The group had sought corporate governance reform since 2013 but suspended the restructuring in January last year when Lee’s two-and-a-half-year prison sentence on bribery and embezzlement charges was finalized.

Lee needs to become a registered executive as a part of the responsible management of a major shareholder, industry sources said. He is vice chairman of Samsung Electronics but an unregistered executive.

Samsung Electronics may put the appointment at its annual shareholders’ meeting in March next year as he is eligible for the position after South Korean President Yoon Suk-yeol granted a special pardon to him last week.

TO ACCELERATE DEVELOPMENT OF NEW GROWTH ENGINES

Lee’s reinstatement is expected to help Samsung speed up investments, especially in the foundry, bio and artificial intelligence sectors, through acquisitions to secure the competitiveness of its future core businesses, industry sources said.

“The mood will change as Lee’s management activity resumes despite some remaining legal risk,” said a Samsung official. Lee is not entirely free of judiciary risk as he stands trial in a separate accounting fraud case related to the 2015 merger involving Samsung affiliates.

Samsung Electronics has not taken over any other firms since 2017 as Lee was embroiled in the political scandal, in which he allegedly offered bribes to former president Park and her confidante Choi Soon-sil to gain government support for his succession. 

Samsung Electronics' $8 billion acquisition of US electronics systems maker Harman in 2016 was the company's last deal in the billions-of-dollars range. 

Lee may also utilize and expand his global networks not only for the group but also for the economy, according to sources. He is likely to play an important role when an economic delegation group is formed for the 77th UN General Assembly next month.

Write to Ji-Eun Jeong at jeong@hankyung.com
Jongwoo Cheon edited this article.