Samsung’s Next Chief Hides in Plain Sight

It’s time for Kwon Oh-hyun to step forward.

The 64-year-old South Korean has a PhD. in Electrical Engineering, oversees the world’s largest electronic components business, and has a proven track record in growing a company’s top and bottom lines.

He also happens to be chairman of Samsung Electronics Co. To be clear, that’s chairman of the board of directors.

Kwon doesn’t run the company. But he should.

Whereas Western companies only give the chairman title to the person heading the board, Samsung has also bestowed that term on Lee Kun-hee as an executive designation. His son, Lee Jae-yong (aka Jay Y. Lee) gets the vice chairman moniker but, again, that’s an executive position — one step up from senior vice president. Lee, the elder, isn’t a board director. Lee, the younger, is.

Company Leader

Samsung’s device solutions business is headed by Kwon Oh-hyun

Source: Bloomberg

Whether or not  Jay Y. Lee’s conviction and imprisonment on charges of bribery and embezzlement affect his position as a director (he will appeal), the court case has uncovered one important element: The younger Lee isn’t competent to run the company.

That’s not my assertion. That’s his. As Bloomberg’s Sam Kim wrote, his legal team formulated that strategy to minimize the heir’s perceived role in a corruption scandal that brought down South Korea’s president.

There was no line of approval involving me … I had no knowledge to make decisions, nor the competence.

If this is the case, then the younger Lee doesn’t deserve an executive title that’s one step higher than senior vice president and on-par with a man who manages $67 billion in annual revenue and generates half the company’s operating income. 

Profit Chief

Samsung’s device solutions business now accounts for half the company’s operating income

Source: Bloomberg

This also raises the issue of the elder Lee’s title. Lee Kun-hee remains in a hospital after a heart attack and isn’t healthy enough to be involved with the company. It’s out of respect to him that he keeps the chairman’s title, but it sends conflicting signals to shareholders, and probably to employees, about his leadership of the company.

What Samsung should do now is promote the elder Lee to chairman-emeritus, which maintains his respected position atop the company, while the younger relinquishes his vice chairman title.

Kwon is a person who has both knowledge and competence. He’s not alone. Yoon Boo-keun, who heads the consumer electronics business, and smartphone chief Shin Jong-kyun have both acquitted themselves well at Samsung. But given Kwon’s role as chairman of the board and in running the largest part of the business, it seems natural that he be the new — albeit reluctant — leader.

If Samsung wants to keep a Lee family member on the board, then it should look to Jay Y.’s sister, Lee Boo-jin. More women are sorely needed in executive and board positions in South Korea’s male-dominated industry. But a Boo-jin appointment would be far from tokenistic: She’s proven her worth running the family’s $3.3 billion hotel and duty-free business, Hotel Shilla Co., which has posted eight straight years of revenue growth.

Such a drastic change needs an agitator. It’s unlikely to happen from within, since the current rubber-stamp board, which includes those three business heads, won’t want to be seen as attempting a coup, and the elder Lee is not fit to make any such decisions.

The younger Lee could and should initiate the reform, but if he doesn’t, outside activists may be the spark required.

-With assistance from Shelly Banjo.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Tim Culpan in Taipei at tculpan1@bloomberg.net

To contact the editor responsible for this story:
Matthew Brooker at mbrooker1@bloomberg.net

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