Samsung Electronics Co heir apparent Lee Jae-yong yesterday took a major step toward control of the family-run conglomerate, joining the board as the company reported a 30 percent profit dive following a highly damaging recall crisis.
The move is being seen as a coronation of sorts of the 48-year-old Lee, who is already vice chairman of Samsung Electronics and has seen his influence grow since his father, Samsung patriarch Lee Kun-hee, suffered a heart attack and was hospitalized in 2014.
Board chairman Kwon Oh-hyun said Lee Jae-yong’s elevation would give him a greater say in decisionmaking at the highest level and help foster “long term, sustainable value” for Samsung shareholders.
The nomination was approved by an extraordinary shareholder meeting, which also focused on the recall fiasco surrounding the flagship Galaxy Note 7 handset that has hammered the reputation of the world’s largest smartphone maker.
“We can now say that Lee’s [Jae-yong] regime has officially begun,” Korea Value Asset Management Co chief investment officer Lee Chaiwon said.
“I think a new era is coming. The company will become more market-friendly,” Lee Chaiwon said.
Samsung’s share price rose more than 2 percent in morning trade, but then fell back to close up 0.4 percent.
The shareholder meeting began just hours after Samsung announced a third-quarter operating profit of 5.2 trillion won (US$4.6 billion) — down from 7.3 trillion won a year earlier.
The slump was in line with a revised earning estimate two weeks earlier after it ended production of the Note 7 due to devices overheating and bursting into flames.
Scrapping the Note 7 saw earnings of the core mobile business drop off a cliff, with the mobile division’s operating profit for the third quarter down almost 98 percent on-quarter at just 100 billion won.
The impact of the Note 7 debacle on the electronics giant’s brand name is still being calculated, with Samsung itself having predicted another US$3 billion-plus in lost profits over the next two quarters.
As the newest and most high-profile board member, Lee Jae-yong will have to deal with the harsh spotlight the Note 7 recall shone on the company’s management style.
“It was a problem caused not only by technical errors, but also by rigid corporate governance structure,” said Kim Sang-jo, a Samsung shareholder and head of the Seoul-based monitoring group Solidarity for Economic Reform.
“All the executives here are, I’m sorry to say this, those hired by [the Lee family] and remarks by such executives will not be enough to earn the trust of the market,” Kim said at the shareholder meeting.
“Only messages delivered by Lee [Jae-yong] himself will be significant .... so I hope he will come out in public to talk about these pressing issues of how to improve corporate governance and corporate culture,” Kim said.
Lee Jae-yong did not attend the shareholder meeting.
Despite the pall cast over the smartphone division, Samsung’s display and chip businesses — which supply screens and memory chips to TV makers and rival phone brands — has held up.
Operating profit in the semiconductor division stood at 3.37 trillion won in the third quarter, up 28 percent on-quarter.
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