Samsung Strengthens Autonomous Management of Units | Be Korea-savvy

Samsung Strengthens Autonomous Management of Units

(image: KobizMedia/ Korea Bizwire)

(image: KobizMedia/ Korea Bizwire)

SEOUL, Feb. 27 (Korea Bizwire)Samsung Group, South Korea’s top conglomerate, has redoubled its efforts of the past year to allow subsidiaries to operate independently following a surprise announcement of plans to overhaul the group’s management, industry watchers said Tuesday.

The plans, unveiled Feb. 28, 2017, called for the abolition of its key future strategy office, which employs 200 elite officials picked from Samsung affiliates. One of the office’s main tasks was to deal with government affairs, making it vulnerable to what critics say were cozy ties with bureaucrats.

Samsung affiliates were also permitted to independently make their own business decisions through their board meetings. In addition, Samsung Group permanently halted its weekly Wednesday meetings of top executives to address key managerial issues.

The plans came as Samsung’s de facto chief, Lee Jae-yong, faced indictment for bribery, embezzlement and other charges in connection with the scandal that led to the impeachment of President Park Geun-hye.

Lee, who was arrested in February last year over his alleged role in the scandal, told lawmakers in December 2016 that he would abolish the group’s future strategy office, which has come under criticism regarding the scandal.

Earlier this month, Lee was released after an appellate court handed him a suspended sentence, dismissing most of the key charges against him in the bribery and corruption scandal. A lower court sentenced him to five years in prison in August last year.

Industry watchers said Samsung Group has muddled through the “worst period” thanks to the strong performance of Samsung Electronics Co., despite concerns that the group would sink into a crisis due to the abolition of the group control tower in the absence of Lee.

Samsung Electronics, the world’s top smartphone and memory chip maker, saw its net profit soar 86 percent on-year to 42.2 trillion won (US$39.4 billion) and its sales reach 239.5 trillion.

Following the announcement of the revamp plans, Samsung has been operating under three subgroups — electronics units led by Samsung Electronics; non-electronics manufacturing subsidiaries headed by Samsung C&T; and financial affiliates spearheaded by Samsung Life Insurance.

Three task forces have recently been established to coordinate efforts to boost the competitiveness of the three subgroups.

Despite improved managerial practices, analysts said it will take a while for Samsung to get back on track due to negatives at home and abroad in the wake of Lee’s absence from group management.

Three days after the February ruling, both the special counsel and Lee’s legal team appealed to the Supreme Court. The schedule for the trial has yet to be made public.

Samsung Group is also faced with such unfavorable factors the government’s strong will to reform family-controlled conglomerates, a series of prosecution probes into alleged corruption involving businessmen and politicians under previous governments and growing trade pressure from the United States and China.

An industry source expressed concerns that the absence of “a control tower” at Samsung could make a dent in the competitiveness of not only Samsung but also South Korea.


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