Can Samsung heir Lee Jae Yong control tech giant behind bars?

Lee Jae Yong is rumoured to be eyeing to launch a new office so that he could have more direct control on the Samsung empire during his time in jail.
Lee Jae Yong is rumoured to be eyeing to launch a new office so that he could have more direct control on the Samsung empire during his time in jail.PHOTO: AFP

SEOUL (THE KOREA HERALD/ASIA NEWS NETWORK) - The resignation of Samsung Electronics' commander-in-chief Kwon Oh Hyun last Friday (Oct 13) signalled large-scale personnel reshuffle, and eyes are now again zeroing in on jailed heir to the group Lee Jae Yong - on how possible it would be for him to strategise, control and direct future steps from his cell.

According to experts who have studied Samsung and other South Korean conglomerates, also known as chaebols, closely for years, there were cases of the so-called "in-prison management" in the recent past, and it is highly likely for the 49-year-old vice-chairman to follow suit.

"The primary jobs for chaebol owners are to gain a full grip of the firm by conducting personal reshuffle of top managers like presidents and also to make strategic decisions for the group's future growth engine," said Park Sang In, professor at Seoul National University's Graduate School of Public Administration.

"Those two jobs are something that can be done anywhere including inside jail. Other tycoons have done it, and so too can Lee Jae Yong."

A sudden departure by Kwon, who had led Samsung's thriving chip business, fuelled speculations among which was that the decision was made to pass the leadership baton to Lee and his people in Samsung.

Kwon, along with Choi Gee Sung, former head of the now-defunct Corporate Strategy Office, spent more than 30 years at Samsung. Kwon was regarded as a person loyal to the bedridden Chairman Lee Kun Hee, father of Lee Jae Yong.

"Kwon's announcement to leave Samsung signals that an era of Samsung led by Lee Kun Hee's people has reached an end and the new era of Lee Jae Yong's people has just begun," said Park Ju Gun, co-president of CEOScore, a local corporate tracker.

Concurrently, rumours are also circulating that Lee is eyeing to launch a new office so that he could have more direct control on Samsung empire during his time in jail. The envisioned office will be something different from the former one, according to reports quoting insiders.

The former one was effectively closed as part of Lee's pledge to increase transparency after he faced heavy grilling by lawmakers during a hearing on the presidential bribery scandal last year.

"Because Lee is in big trouble and the crisis he is facing, he has to figure out a way to control Samsung in jail. This is why he has to appoint people whom he trusts, to core positions like the head of boardroom," said Mr Park.

Tycoons including SK Group Chairman Chey Tae Won and CJ Group Chairman Lee Jay Hyun have also cemented their power during their time in jail.

While Chey was serving his prison term for embezzlement between 2014 and 2015, for example, SK Group launched a top decision-making body called Supex Council to minimise the impact from the absence of the leader.

"SK's Supex Council acted as a proxy to control the group. The only difference between Lee and Chey is that the Samsung heir hasn't completed his succession scenario yet," said Mr Park, stressing that his incomplete succession could make him more worried and trigger an ugly family feud over shares Chairman Lee holds.

The ailing father holds 4 per cent in Samsung Electronics and 20 per cent in Samsung Insurance. Under the law, assets are inherited equally by sons and daughters, while spouses get half. The chairman has been hospitalised since a severe heart attack in 2014.

Meanwhile, Samsung refuted speculations of Lee controlling the tech giant in jail, saying that he is fully occupied with trials.

"It is possible for him to be briefed (during the visiting hours), but it does not make sense for the vice-chairman to make such decisions in jail," said a Samsung official who used to worked for Samsung's former control tower.

"Even if the personal reshuffle is to happen, it will be done by experts such as people in human resource department who knows who will best fit into jobs, not Lee."