Samsung Without Heads Will Strengthen Collective Leadership

【Global Economics Reporter Wang Huan】 “Nihon Keizai Shimbun” reported on February 22 that due to the arrest of Samsung Electronics Vice President Li Zaiyu, the Samsung Group will strengthen the collective leadership system and will employ about 60 group corporate presidents. The participating "Council delegation meeting" made decisions for the center. As Samsung's command tower, it is expected that the dissolution of the "future strategy room" will also be postponed. The first time the headman was arrested, Samsung took a stable and prioritized layout, but in the absence of a core business, future judgments and reforms may progress slowly.

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“There is no Samsung of Lee Kun Hee and Lee Jae Yee” (Korea’s “Korean Daily”) and “Leading Power” (South Korea’s “Daily Economic News”). After South Korea was arrested on February 18, many major South Korean newspapers reported. The huge impact of this incident. Samsung related people said uneasily, "I did not expect. I do not know what will happen in the future."

Samsung is trying to calm the turmoil within the company. On the evening of the arrest of Li Zaiyu, Samsung wrote in an article published on the internal website: “I hope everyone believes in the company and continues to work hard and try to be the best” and calls for the unity of employees.

This article was issued jointly by the presidents of approximately 60 companies in the Samsung Group. The article stated that "when encountering such a state of affairs, it has suffered a great deal of hardship and was very sad" and was thought to express the idea of ​​over-crisis through the collective leadership system.

Samsung had precedents of adopting collective leadership. In 2008, Samsung President Lee Kin Hee resigned from office temporarily because of illegal funds. At that time, the president’s group was responsible for making decisions. The presidents of the companies and Samsung Electronics’ management met 3 times a week. Recently, the conference gradually transformed into a seminar for learning advanced technology and business theory. However, it is expected that business issues will be discussed in the future, and the board of directors of various companies will adopt the decision after the approval of the meeting.

At present, Samsung is responsible for the growth strategy of the 200-person future strategic room. The current method does not seem to change. The famous “strategic planning room” was a powerful source for Samsung and its future strategy room is its successor organization. The future strategy room has foreign-related functions and participated in providing funds for the close friend of President Park Geun-hye. In 2016, Li Zaixian made it clear that he would "dissolve (future strategy room)." The purpose is to eliminate the suspicion of "collaboration between officials and businessmen" from the outside world while quitting the "National Federation of Economic People" of economic groups.

As Li was arrested, the situation changed. If the future strategy room is dissolved, the department that sets out the growth strategy from the group as a whole will disappear, so the possibility of continuing to exist is relatively large. The strategy of the future strategy room, the decision of the president of the company, and the specific implementation process of each company will become the basis of Samsung's operations.

Whether or not to set up a deputy chairperson is also crucial. In 2008, 78-year-old veteran executive Samsung Life Insurance Li Xiaobin served as the group's acting president. This time, Cui Zhicheng, the 66-year-old vice president in charge of the future strategy room, and 64-year-old chairman and vice president of the board of directors have become candidates.

Cui Zhicheng is responsible for the planning of future key areas such as auto parts and bio-pharmaceuticals, and he controls the semi-conductor sector, which is the pillar of revenue, and both have rich performance.

However, there are many opinions within Samsung that from the perspective of waiting for Li Zaiyu to return, neither of them should become the acting president of power concentration, and should only become the responsible person of the outside world.

Samsung faces many issues. In M&A (M&A), personnel and equipment investment, it is expected that all adjustments will be difficult due to the lack of influence from the chief executive. As a practice when the head of the financial group was arrested, there are many examples of instructions in the detention center. Li Zaiyi is also likely to follow the practice, but it is inevitable that decisions will not be made if the atmosphere cannot be reached.

Although Li Zaiyu did not have the charisma of his father Lee Kun Hee, the number of occasions where he played leadership is also increasing. In 2016, under his leadership, Samsung spent US$8 billion to acquire Harman International, a large American auto parts company. Without the founder family, Li Zaisheng, Samsung’s large-scale adjustments such as the transition to a holding company system are difficult to achieve.

Especially investment in artificial intelligence (AI), etc., new business investment focusing on social changes is likely to weaken. After achieving the second highest operating profit in the history of 29 trillion won in 2016, although the collective leadership system can effectively maintain the stability in the next 1-2 years, there is a risk that the competitiveness will be reduced after 3-5 years.

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