Rumours of Samsung reform emerge amid ongoing probe
By Cho Chung-un
09 February 2017

SEOUL (The Korea Herald/ ANN) - Changes in Samsung infrastructure will send ripple effects on economy and job market.

Despite facing an ongoing investigation by an independent counsel, Samsung Group and the tech giant’s de facto leader Lee Jae-yong seem to be preparing a set of reform plans to appease public anger and tighten the grip on management, according to local reports and market insiders on Thursday.

Earlier this week, Samsung Group officially said that it would disband the group’s future strategy office, which has long served as a control tower orchestrating overall business operations of Samsung affiliates. Local reports were suggesting that along with the disbandment of the decadesold control tower, Samsung could also announce a set of reform plans to seek a turnaround.

Samsung had carried out a similar scenario in 2008, when a set of reform plans were announced in April of that year, right before the prosecution wrapped up a high-profile investigation into Samsung Chairman Lee Kun-hee’s slush fund. 

This time, the announcement, if made, is likely to be at the end of this month when the independent counsel is set to complete its investigation.

Initiated by Lee Jae-yong, the chairman’s only son and the heir apparent, the group could seek a generational shift in management by replacing top executives who climbed the corporate ladder under the wings of Lee’s father, according to industry watchers.

The names being mentioned include the head and the deputy head of Samsung Group’s future strategy office, Choi Ji-sung and Chang Choong-ki. The two are also being implicated in the scandal that they allegedly authorized Samsung’s “donation” to Choi Soon-sil, a woman at the center of the nation’s biggest influence-peddling scandal. The counsel sought to arrest Lee Jae-yong last month on charges of bribery, but failed on the court’s rejection. The special prosecutors have not decided whether to indict Choi and Chang yet. 

Rumours are also circulating that the reform measures include Samsung abolishing the open recruitment system and the weekly meeting of Samsung CEOs, and Lee Jae-yong offering 1 trillion won ($873.4 billion) as a donation to the public. Lee vowed, during a nationally televised parliamentary hearing in December, that he would spend money “for good use” after discussing the matter with his siblings and mother. 

According to rumours, the reform package could also include ways to give more autonomy to Samsung affiliates so that CEOs could independently run their businesses, and nurture startups to reinforce the tech giant’s creativity and openness.

A Samsung Group official said granting more autonomy to Samsung affiliates corresponds to the group’s decision to disband the future strategy office. 

“Abolishing the future strategy office means that Samsung affiliates will no longer receive directions from the group,” said the official. “But reports on the generation shift, the vice chairman (Lee) donating 1 trillion won and stopping the recruiting of employees on regular bases are not true.”

Meanwhile, a reform plan on splitting Samsung Electronics into holding and operating companies, appears unlikely to be discussed during a shareholder meeting scheduled for March.

According to industry insiders, US hedge fund Elliott, which offered the plan to Samsung late last year, didn’t submit related documents to raise the issue at the shareholders‘ meeting.

It had suggested the tech giant split into holding and operating companies, and list the operating unit on the Nasdaq stock exchange. 

Elliott, through its affiliates -- Blake Capital and Potter Capital – holds a 0.62 percent stake in Samsung Electronics. It had strongly opposed the merger between Samsung C&T and Cheil Industries in 2015.

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