The Korea Fair Trade Commission designated Lee Jae-yong as head of Samsung Group as his father and bedridden Chairman Lee Kun-hee is judged as being incapable of doing business management independently. 

The designation does not force Samsung to make any formal changes to its management, but means that the FTC will now treat Lee Jae-yong as the head of the group when applying regulations. 

That means Lee can be held responsible for FTC rule violations Samsung commits in cases where his father previously would have been accountable.

“For Samsung, there are clear reasons that its head position should be changed to Lee Jae-yong,” said the watchdog‘s spokesperson on Tuesday.
“Although (Lee Kun-hee) is still the largest investor of Samsung Group and serves as group chairman, he has not participated in management activities over the last four years since he was hospitalized in May, 2014."

Since the senior Lee was hospitalized, there have been crucial changes in Samsung’s ownership structure, including its affiliate management and merger & acquisitions, according to the FTC.

“Although Lee Jae-yong has less stake than (Lee Kun-hee) for the entire group, he has the largest stake of Samsung C&T Corporation, which stays at the top in terms of corporate governance, and he is vice chairman of Samsung Electronics,“ the spokesperson said.

The son Lee currently has a 17.08 percent stake of Samsung’s de-facto holding firm, Samsung C&T Corporation, and holds a 0.65 percent stake of the group’s key arm, Samsung Electronics. He indirectly controls Samsung Electronics with Samsung C&T Corporation’s 4.7 percent stake and Samsung Life Insurance’s 8.3 percent stake.

In February, the Seoul High Court also defined Lee Jae-yong as de facto head of Samsung Group when it tried Lee’s case over the charges of bribery.

Samsung, however, claimed that the FTC designation is to have little impact on the group and Lee’s role.

“The designation by the FTC has nothing to do with Samsung Group as it was made for the convenience of regulating conglomerates,” said Yook Sung-kwon, chief of the FTC’s business group policy division. 

The FTC also designated Shin Dong-bin as head of Lotte Group, replacing his father and group founder Shin Kyuk-ho.

For the reason, the FTC explained, “Shin Dong-bin is a CEO and the largest individual investor of Lotte Holdings and he is also the chief of Hotel Lotte, which stays at the top in terms of corporate governance outside a holding system.”

On the day, Lotte issued a statement, saying, “As the FTC has reflected the management situation of Lotte and designated Shin as its head, he has now officially and practically represented Lotte to lead its business.”

For the nation’s online platform giant, Naver, the fair trade regulator retained the top position of its founder Lee Hae-jin.

“Although Lee recently sold his 0.6 percent stake, he is still the largest individual investor with a 3.72 percent stake,” the FTC said.

Although Lee left the company board early this year, he is presumed to be exercising dominant influence to the company’s management considering the importance of his current post of global investment officer and chief of Line, according to the regulator.

The role of global investment officer is important to Naver as it explores new technologies and investment overseas while Japan-based global messenger, Line, accounts for 40 percent of Naver’s total assets and 37.4 percent of total sales.

By Shin Ji-hye (shinjh@heraldcorp.com)