April 26, 2024

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[THE INVESTOR] The unprecedented global recall of Samsung’s Galaxy Note 7 smartphones is testing Lee Jae-yong, the heir apparent to the nation’s largest business empire, as he faces the biggest crisis ever at a critical time when the group is gearing up for a leadership transition.

The Samsung Electronics vice chairman is set to join the boardroom after a shareholders’ meeting on Oct. 27, a move seen as him tightening his grip on the tech giant after the smartphone crisis.

 

Samsung Electronics Vice Chairman Lee Jae-yong

With just two weeks remaining for the vote, the market remains curious on how he will contain the fallout from the smartphone’s exploding batteries even with replacement devices, and seek a breakthrough for the crisis-hit tech giant.

In addition to the smartphone crisis, Lee also faces mounting pressure from a US activist hedge fund to split Samsung Electronics into holding and operating units, with a Nasdaq listing of the latter.

The proposal by Elliott Management has laid favorable grounds for him to reshape the firm’s corporate structure to speed up the leadership transition. Samsung has remained calm. Experts say the vice chairman’s relatively small share in Samsung Electronics, 0.59 percent, could be a problem for him to make an immediate decision.

Since his father, Samsung Chairman Lee Kun-hee, collapsed in a heart attack 2 1/2 years ago, the group has been pushing a series of structural changes through high-profile splits, mergers and assets sales.

But the group has been reluctant to make a bold move without winning shareholders’ endorsement, particularly after a bitter lesson it learned from a proxy fight between Elliott over the merger of two Samsung affiliates.

The nature of Elliott as a foreign hedge fund for the South Korean tech giant is hard to overlook, as 50 percent of its shares are in the hands of investors overseas, experts say.

By Cho Chung-un/The Korea Herald (christory@heraldcorp.com)