The Samsung Group is starting what is seen as a new experiment in management in July. With the resignation of chairman Lee Kun-hee, the country’s biggest family-owned conglomerate will introduce an independent management system for its subsidiaries after dismantling the powerful strategic planning office, which has served as the group's control tower. This marks a sea change in the conglomerate's 70-year history.
Lee Soo-bin, chairman of Samsung Life Insurance, will represent the Samsung Group. Lee Yoon-woo, vice chairman of Samsung Electronics, will take charge of big investment decisions and coordinating overlapping projects between subsidiaries.
Reactions have been mixed so far. Some feel the group will be able to improve corporate governance under professional managers, while others warn the group could neglect long-term investments or be exposed to takeover bids by focusing too much on short-term achievements.
Reactions have been mixed so far. Some feel the group will be able to improve corporate governance under professional managers, while others warn the group could neglect long-term investments or be exposed to takeover bids by focusing too much on short-term achievements.
Samsung on Wednesday unveiled a series of measures to make management more transparent following a management reform program released in April. Lee Kun-hee, who resigned as chairman of Samsung Electronics, officially retires on July 1. He will be given an office and a secretary as a former chairman.
The strategic planning office, which has been in charge of coordinating projects between subsidiaries, reshuffling the group's top executives, and managing the group's finances, will be disbanded and its functions assigned to individual subsidiaries.
Samsung vice chairman Lee Hak-soo and president Kim In-joo will also retire from active management but remain as an adviser and a counselor respectively to Samsung Electronics.
The dilemma Samsung faced was that although the strategic planning office, as well as Lee Kun-hee, had played a key role in helping Samsung grow as a global enterprise, it had to be closed after massive corruption scandals exposed lack of transparency.
Hwang Young-ki, a former Woori Financial Group chairman, recalls his days as president of Samsung Securities, when “about 70 percent of my duties, including personnel, finance and external affairs, were carried out by the group headquarters. So I was able to concentrate on key duties as CEO.“
That suggests the rapid management style, a key to Samsung's success, its fast decision-making process and bold investment decisions, will probably slow down considerably. Samsung also carried out massive marketing activities through global sports events such as the Olympics, helped by Lee Kun-hee’s membership in the International Olympic Committee. His retirement is bound to reduce such activities.
The strategic planning office, which has been in charge of coordinating projects between subsidiaries, reshuffling the group's top executives, and managing the group's finances, will be disbanded and its functions assigned to individual subsidiaries.
Samsung vice chairman Lee Hak-soo and president Kim In-joo will also retire from active management but remain as an adviser and a counselor respectively to Samsung Electronics.
The dilemma Samsung faced was that although the strategic planning office, as well as Lee Kun-hee, had played a key role in helping Samsung grow as a global enterprise, it had to be closed after massive corruption scandals exposed lack of transparency.
Hwang Young-ki, a former Woori Financial Group chairman, recalls his days as president of Samsung Securities, when “about 70 percent of my duties, including personnel, finance and external affairs, were carried out by the group headquarters. So I was able to concentrate on key duties as CEO.“
That suggests the rapid management style, a key to Samsung's success, its fast decision-making process and bold investment decisions, will probably slow down considerably. Samsung also carried out massive marketing activities through global sports events such as the Olympics, helped by Lee Kun-hee’s membership in the International Olympic Committee. His retirement is bound to reduce such activities.
But Lee Kun-hee can still exercise influence as the largest shareholder. Around the end of this year, when court proceedings in the Samsung corruption scandal are expected to come to an end, Samsung will probably conduct a large-scale personnel reshuffle and restructuring. And when Lee's son and heir presumptive Jae-yong returns from overseas duties in a few years, Samsung's top management will likely be restructured once again.
Kwack Mahn-soon, a professor at Catholic University of Korea, said the group’s restructuring is “an important experiment in introducing a coexistence of owner management and professional management systems. Samsung's reforms will have great implications for other conglomerates as well."
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