Samsung heir JY Lee: My children will not take over
The Korea Herald reported on 25 January 2021 that both the Prosecutors and Samsung heir and Vice Chairman Lee Jae-yong, 52, will not appeal against the decision of the Seoul High Court in sentencing JY Lee back to jail on 18 January 2021. JY Lee is de facto head of the Samsung Group since his father, Chairman Lee Kun Hee, died on 25 October 2020. The Supreme Court had on an appeal by the Prosecutors ordered a retrial of the corruption charges against JY Lee which were committed during the tenure of former S. Korean President Park Geun-hye. He was accused of providing a total of 8.9billion won in donations to a non-profit organization run by Choi Soon-sil, (a close friend of President Park) and financial support for Choi’s daughter’s equestrian training allegedly in return for political favours. JY Lee was sentenced to 5 years imprisonment in 2017 and was freed a year later after the High Court reduced his sentence, and suspended the jail term to two years and 3 months.
During the retrial, JY Lee pleaded for leniency and provided evidence of Samsung’s compliance with the Court’s direction to put in place satisfactory corporate governance procedures. As part of it, JY Lee declared that there would be no dynastic succession. Nevertheless the High Court proceeded with returning JY Lee to incarceration. He is the first member of the Lee family of Samsung to be imprisoned. JY Lee has to serve out another one year and six months of his sentence. He should be out free by mid 2022 unless he is granted a pardon or commutation. According to The Korea Herald, chiefs of local business associations expressed regret at the High Court’s decision. The Korea Enterprises Federation stated that the ruling will create a management vacuum within the Samsung Group which would delay crucial business decisions and investments so necessary at a time like this.
No 4th generation succession
The declaration by JY Lee to the High Court that “my children will not take over from me” thus officially ending the Lee family dynastic succession at the Samsung conglomerate caught the Korean business community by surprise. It is a tradition in S. Korean conglomerates for the son to take over a business established by the founding family and where the family still retains a controlling stake or substantial stake. JY Lee has a son and daughter from his marriage to Lim Se-ryung, joint heiress to the S. Korean listed Daesang Corporation fortune. The fairy tale marriage between JY Lee and Se-ryung ended in divorce in 2009 after 11 years. Se-Ryung has returned to Daesang Corporation as Senior Managing Director on a joint basis with her younger sister, Lim Sang-min. Both JY Lee and his ex-wife have not remarried. Custody of the two children were by mutual agreement given to JY Lee. His son, Lee Ji-Ho (in his 20s) is the only 4th generation male heir to the Samsung empire.
The Samsung conglomerate and its key 4 core businesses are run by top notch professional CEOs, each heading the Consumer Electronics, IT & Mobile Communications, Smartphone Division, and Device Solutions (memory chips etc). However, they lack the authority to make large-scale acquisitions and investments without the founding family’s approval. Samsung is Lee family domain.
Founder of Samsung
JY Lee’s grandfather, Lee Byung-chul (1910-1987) is the founder of Samsung. Lee Byung-chul came from a wealthy land owning family (Gyeongju Lee clan) in Uiryeong County, South Gyeongsang Province. With his inheritance, he started Samsung Trading (Samsung means Three Stars) in March 1938. By post war 1947, Samsung Trading had become one of the 10 largest companies in S. Korea.
The outbreak of the Korean War (1950-53) led Lee Byung-chul to relocate Samsung Trading to Busan. This shift was a boon to the company because the massive influx of US Army troops and military equipment to S. Korea boosted Samsung Trading’s trucking business. Lee started a successful sugar refinery, expanded into textile manufacturing and set up the biggest woollen mill in Korea. With the wealth from his flourishing businesses, Lee Byung-chul invested in other sectors like insurance, finance, retail and security. In 1961 when President (General) Park Chung-hee came into power, Lee Byung-chul went into exile in Japan. President Park ruled with an iron hand to bring S. Korea out of poverty. He nationalised all the banks. Park was able to get the wealthy S. Korean businessmen to make large contributions towards the rebuilding of the nation. Lee returned to S. Korea.
In the 1970s and 1980s, the Samsung Group began expanding into consumer electronics and in 1978 entered the semi-conductor industry. The company began producing PCs in 1983. Lee Byung-chul passed away on 19 November 1987. He left behind a legacy that is deeply imprinted in Korean minds. Lee Byung-chul established the influential Federation of Korean Industries and was its first Chairman. He was succeeded by his third son, Lee Kun-hee.
Lee Kun-hee (1942-2020)
In a rare interview with Louis Kraar of Asiaweek (published on 1 June 1994), Samsung Chairman Lee Kun-hee frankly spoke about his father, Lee Byung-chul, and the difficulties he had working with him. He also revealed a lot of his philosophical and management thoughts. If not for Kraar, Asia and the world would not have been the beneficiary of such intimate revelations. Chairman Lee had since not given any interviews to the media.
Lee Kun-hee had been bed-ridden since a heart attack in May 2014 and was receiving treatment at the Samsung Medical Centre with no visitors allowed. His only son, JY Lee was acting as the de facto chief of the tech titan. The Fair Trade Commission of S. Korea recognized Lee Jae-yong as the actual chief of the group since 2018.
- Samsung Newsroom. 28 January 2021. Samsung Electronics Announces Fourth Quarter and FY 2020 Results. .Samsung Electronics Announces Fourth Quarter and FY 2020 Results – Samsung Global Newsroom
- The Korea Herald. 25 October 2020. Shin Ji-hye. Architect of Samsung’s tech revolution, Chairman Lee Kun-hee dies at 78. Architect of Samsung’s tech revolution, Chairman Lee Kun-hee dies at 78 (koreaherald.com)
- The Korea Herald. 25 January 2021.Samsung heir Lee, prosecutors won't appeal ruling in bribery case. http://www.koreaherald.com/view.php?ud=20210125000443&kr=1&nt=1
- The Korea Times. Imprisoned Samsung heir vows continuous support for compliance committee. Imprisoned Samsung heir vows continuous support for compliance committee (koreatimes.co.kr)