BUSINESS

[Newsmaker] Watchdog blasted over call for new Samsung control tower

By Song Su-hyun

Industry responds to FTC chairman’s demand for Samsung governance change with derision

  • Published : May 15, 2018 - 18:20
  • Updated : May 15, 2018 - 18:21
“How can a control tower not have control?”

An official at Samsung Electronics threw the question back to The Korea Herald when asked what Samsung executives and employees think of the latest comments by Kim Sang-jo, chairman of the Fair Trade Commission.

Kim said in interviews with local media last week that Samsung needed a new control tower to coordinate all affiliates. He publicly urged Samsung heir apparent Lee Jae-yong to take action to overhaul the corporation’s governance structure across major Samsung companies.

In the chairman’s definition, the new control tower should have both authority and responsibility. Such a body should only make tentative decisions and let the boards of each affiliate make their own decisions independently. 

Kim Sang-jo(center) , chairman of Korea`s Fair Trade Commission (Yonhap)

Kim’s comments came some 100 days since Samsung heir Lee was set free after serving an about yearlong jail term for involvement in a political bribery scandal, which had also sparked the closure of Samsung’s Corporate (Future) Strategy Office. Lee has maintained a low-profile since then, only making overseas trips to meet with key business partners.

The call for a new control tower drew immediate criticism from the industry, as it appeared to be a complete reversal of his previous denunciations of Samsung’s former control tower.

Samsung decided to disband the Corporate Strategy Office in February 2016 along with the notion of “Samsung Group,” as the conglomerate came under fire for bribing former South Korean President Park Geun-hye in exchange for support for Lee’s leadership inheritance from his ailing father Lee Kun-hee.

Most senior officials who worked for external relations of the group and the owner family at the closed control tower were dispersed to major affiliates such as Samsung Electronics, Samsung C&T and Samsung Life Insurance.

With the absence of the control tower over the last two years, the 62 Samsung affiliates have been operating independently with the minimum level of formal control or coordination from a single decision-making body.

Samsung Electronics has been running a task force of former officials from the Corporate Strategy Office in order to support the coordinating work with its affiliates.

“The FTC chairman’s comments sound like putting back the clock,” an industry official said. “And it is absurd to have a separate body that has not enough power to operate other affiliates.”

“Samsung’s affiliates are now heading toward autonomous management as their board of directors are playing the central role,” the official added.

However, industry sources have said decision making processes at the conglomerate under the new system resulted in delays and mixups.

“Some outside officials complain that it is hard to contact a Samsung official in charge of a particular issue in terms of external relations since the control tower is gone. I think Kim’s comments come largely from those industry-wide complaints.”

In response to the criticism of Kim, the antitrust watchdog said the chairman’s comments about the Samsung control tower have been somewhat exaggerated.

“The chairman did mention the need for such a control tower in theory that applies to all companies, not only Samsung,” said FTC spokesman Yoon Soo-hyun. “In other words, the control tower would be translated to a holding company, but the chairman is not demanding or ordering Samsung to do so. It is one of many possible measures Samsung can consider.”

Yoon added, “As Samsung accounts for a huge proportion of the national economy, many expect Samsung to do something for the market and economy as early as possible.”

By Song Su-hyun (song@heraldcorp.com)