The arrest of Samsung Group leader Jay Y.Lee on bribery charges could hamper decisions on strategic investments and acquisitions at the sprawling conglomerate, insiders and former executives said, even with strong leadership at its many businesses.
Although business at flagship Samsung Electronics Co is humming along, big calls would need to be made and the man most likely to be called upon to make them is Choi Gee-sung, the top lieutenant at Samsung Group and a mentor to Lee.
“Choi is very experienced and has done a good job. He is the one best-placed to manage group-level affairs in Lee’s absence,” one Samsung insider said.
While Samsung Electronics is still smarting from the debacle of its exploding Galaxy Note 7 smartphone batteries, its semiconductor business is in good health. Its share price has risen about 60 percent in the past year.
However, the wide-ranging investigation, part of a corruption scandal that led lawmakers to impeach South Korean President Park Geun-hye, has been a major distraction for the nation’s largest conglomerate.
“Everything has virtually stopped,” said a second executive at Samsung Group’s powerful strategy office that Choi heads. “We are mainly focusing on the prosecutor’s investigation [into Lee and Samsung] ... We will be running an emergency plan and everything will be under Choi’s control for now.”
Yet others say even Choi’s role could be limited and Samsung might have to rely more on each affiliate’s top management, with Choi also under investigation by special prosecutors.
“Since we have decided to dismantle the group strategy office, Choi’s role is likely to gradually decrease, although we cannot say for how much and when,” another Samsung executive said.
“We have a system in place with professional management teams, so in terms of day-to-day operations things should be fine,” a fourth group insider said.
Kim Yong-serk, a former Samsung Electronics executive who is now a professor at Sungkyunkwan University in Seoul, said it is not like all the Samsung businesses would grind to a halt.
“There are many smart people at the company,” Kim said.
However, Lee’s arrest would have an impact on longer-term investment decisions at the conglomerate.
“Samsung presidents are evaluated on an annual basis, so they cannot make bold bets about the future. They need a chairman for that,” Kim said.
When Samsung Electronics trailed Nokia Oyj in mobile phones — just five years ago — Choi, then chief executive, set his sights on a different rival.
“Competition is coming from elsewhere. There is a company more profitable than us and we should change our target,” he said in January 2012, referring to Apple Inc.
That year, Samsung ended Nokia’s 14-year domination of the mobile market, ultimately also overtaking Apple as the world’s biggest smartphone maker.
In a Samsung career spanning more than three decades, Choi had worked in all the main businesses, from semiconductors and home appliances to televisions and telecoms, before taking over as chief executive.
As head of strategy, 66-year-old Choi has acted as Lee’s mentor and been closely involved in preparing the path for him to take over from his father, who was incapacitated by a heart attack in 2014.
Lee’s absence, if prolonged, could also see a bigger role for Samsung Electronics vice chairman and chief executive Kwon Oh-hyun.