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FTC says it knows who Samsung’s real boss is

May 02,2018
Korea’s antitrust body named Samsung’s heir apparent Lee Jae-yong as the true owner of Korea’s largest conglomerate, replacing his father, Chairman Lee Kun-hee.

The Fair Trade Commission on Tuesday unveiled its renewed list of the owners of the country’s top 49 conglomerates. It launched a process in January to review its list and see if its designations reflect reality. The FTC took into account leaders’ direct and indirect stakes in the conglomerates and their direct and indirect influence on management activities and the appointment of executives.

The FTC also said that Lotte’s Shin Kyuk-ho, the patriarch of the retail giant and its general chairman, was no longer the company’s leader, replacing him with his son, Chairman Shin Dong-bin.

“The previous chairmen at both Samsung and Lotte don’t have the same stake ownership and power over governance as they did,” said Kim Sang-jo, chairman of the FTC, in a press briefing on Tuesday. “We concluded that new chairmen needed to be designated, given that there have been crucial changes to overall management over the past year.”

The antitrust regulator sets boundaries for conglomerate families, nonprofit corporations, affiliates and executives based on their relationship to the owner.

All companies under the leader have to make regulatory filings under the Fair Trade Act, and family members are scrutinized for any personal gain they take from the companies. These boundaries form the basis of Korea’s chaebol policies.

Even though Lee Kun-hee is still the biggest Samsung stakeholder, he is bedridden and unable to manage the conglomerate.

“Communication with Chairman Lee Kun-hee is practically impossible, documents from Samsung and [Chairman Lee’s] doctor confirmed,” said Shin Bong-sam, head of the business group bureau at the FTC. “It’s certain that he can’t exercise influential power, directly or indirectly.”

His son, Lee Jae-yong, governs Samsung Electronics with a 17.2 percent stake in Samsung C&T and a 8.3 percent stake in Samsung Life Insurance, which both govern Samsung Electronics as part of Samsung’s labyrinthine cross-shareholding structure.

Kim of the FTC went on to argue that a major reshuffle at the top manager level and key mergers and acquisitions made when Lee Kun-hee was in the hospital were all executed by Lee Jae-yong.

In response to the FTC’s move, Samsung said it won’t introduce any changes to Samsung affiliates, nor will it change Lee Jae-yong’s role within the conglomerate. Its spokesman refused to comment further.

The FTC began compiling a list of conglomerates and naming their owners in 1987. The FTC assumes that Lee Kun-hee, who has remained at the Samsung Medical Center after suffering a heart attack in May 2014, was named the owner of Samsung in 1987, when his father, Samsung founder Lee Byung-chull, passed away.

The FTC’s decision on Lotte is related to the conglomerate’s recent executive reshuffle and switch to a holding company structure. Lotte introduced the changes after a Seoul court named two legal guardians for Shin Kyuk-ho in September 2016 on the grounds that he was not in the right mental state to make his own decisions.

The government body also cited the fact that Shin Dong-bin is the top private shareholder and CEO of Lotte Corporation, the conglomerate’s holding company, and the CEO of Hotel Lotte, which governs affiliates outside of Lotte’s holding company structure.

The FTC kept Lee Hae-jin, Naver’s co-founder and global investment officer, listed as the company’s chairman, despite the top portal site’s request to remove him from the list.

Even though Lee sold a 0.6 percent stake in Naver, he is still the largest private stakeholder and wields dominant power over management, according to the regulator.

In September last year, the FTC added Naver to the list of quasi-chaebol and designated Lee as its owner.


BY SEO JI-EUN [seo.jieun@joongang.co.kr]