Sam­sung scion be­gins reign amid fi­asco

China Daily (USA) - - BUSINESS - By BLOOMBERG

Lee Jae-yong, the crown prince of the found­ing fam­ily that con­trols Sam­sung Group, is get­ting ex­panded cor­po­rate power. Now comes the guess­ing game about what he’ll do with it.

On Thurs­day, Lee of­fi­cially joined the nine-per­son board at Sam­sung Elec­tron­ics Co, whose botched roll out of the Galaxy Note 7 smart­phone de­liv­ered a blow to a pre­mier tech brand and cost the com­pany bil­lions of dol­lars in profit. The move gives the low-pro­file ex­ec­u­tive, also known as Jay Y., a big say over top man­age­ment and strate­gic calls, in­clud­ing re­struc­tur­ings, merg­ers and as­set sales.

His as­cen­sion comes on the same day that Sam­sung re­ported a sharp de­cline in prof­its, as the re­call took its toll. Net in­come fell to 4.41 tril­lion won ($3.9 bil­lion) in the third quar­ter. Shares in the com­pany rose 0.4 per­cent at the close of trade in Seoul.

Lee, 48, is al­ready vicechair­man of Sam­sung Elec­tron­ics and has gained in­flu­ence since his fa­ther, Lee Kun-hee, suf­fered a heart at­tack and was hos­pi­tal­ized in 2014. The found­ing fam­ily con­trols Sam­sung Group, whose ten­ta­cles ex­tend into fi­nan­cial ser­vices, ho­tels, bio­phar­ma­ceu­ti­cals and fashion, through a com­plex net­work of cross own­er­ship. So in away, Lee’s el­e­va­tion to the board of the flag­ship will be some­thing akin to a coro­na­tion.

“We can now say that Lee’s regime has of­fi­cially be­gun,” said Lee Chai-won, chief in­vest­ment of­fi­cer at Korea Value As­set Man­age­ment Co. “I think a new era is com­ing.” Lee be­lieves Jay Y.’s en­hanced in­flu­ence will be an adren­a­line shot for a com­pany in cri­sis.

“The com­pany will be­come more mar­ket-friendly,” he said, pre­dict­ing the new board mem­ber will “quicken its re­struc­tur­ing process.”

Sam­sung Elec­tron­ics has no short­age of chal­lenges, ur­gent ones.

In ad­di­tion to mop­ping up af­ter the Galaxy Note 7 fi­asco, the younger Lee faces a threat from ac­tivist hedge fund El­liott Man­age­ment Corp that is push­ing Sam­sung Elec­tron­ics to sim­plify its own­er­ship struc­ture.

TheNewYork-based fund, founded by stock picker Paul Singer, also wants the com­pany to add in­de­pen­dent di­rec­tors and dish out a spe­cial $27 bil­lion div­i­dend to in­vestors.

AFP

Vis­i­tors ex­pe­ri­ence Sam­sung Elec­tron­ics’ Gear VR dur­ing the Korea Elec­tron­ics Grand Fair at an ex­hi­bi­tion hall in Seoul on Thurs­day.

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