Samsung scion to take
board role at flagship amid Note 7 shock
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[September 12, 2016]
By Se Young Lee
SEOUL (Reuters) - The Samsung Group's
de facto leader and heir apparent is poised to join the board of
crown jewel Samsung Electronics Co Ltd, a step towards formalizing
his role as head of the conglomerate as it reels from a massive
The world's top smartphone maker announced on Monday that its board
nominated 48-year-old Jay Y. Lee as a director. He has been the
group's key decision-maker since his father and group patriarch Lee
Kun-hee was hospitalized after a May 2014 heart attack.
Samsung said it was the right time to put him on the board "to allow
him to take a more active role in the company's strategic
The announcement came on the same day that investors wiped off 17.5
trillion won ($15.7 billion) from the market value of Samsung
Electronics as the recall of its fire-prone Galaxy Note 7
smartphones takes its toll.
Also on Monday, Samsung Electronics announced the $1.05 billion sale
of its printer business to HP Inc, a move that furthers the South
Korean firm's efforts to exit non-core businesses.
The younger Lee was already vice chairman of Samsung Electronics but
did not sit on its board. Investors will vote on his nomination at a
shareholder meeting on Oct 27.
Samsung said its board of directors opted not to wait for the
company's annual shareholder's meeting next year.
"By taking an official position as a member of the Board of
Directors, Mr. Lee is demonstrating his commitment to the future of
the Company and to delivering benefit to the Company and its
shareholders," the company said in a statement.
Taking a director position at Samsung Electronics will give Lee
greater room to operate in managing the company's affairs but also
put him under greater scrutiny for the company's performance.
"He's already been involved in a lot of the strategy and the
decisions, but it's a step that he takes a more formal, official
role in the company," said a person familiar with the matter, adding
that the decision was unrelated to the Galaxy Note 7 issues.
"Idea of Jay taking a board seat is something that has been
deliberated on for some time. Rather than wait until next year’s
annual meeting in March, the thinking was Samsung has a lot of
things coming, so sooner rather than later."
Analysts and investors said the younger Lee taking a board seat may
not immediately affect the company's business operations but was a
welcome development as it signals his official role as leader and
the willingness to take appropriate responsibility.
[to top of second column]
Jay Y. Lee, the only son of Samsung Electronics chairman Lee Kun-hee
and the company's vice chairman, attends the 2015 HO-AM Prize
ceremony which was established by Lee Kun-hee, in Seoul, South
Korea, June 1, 2015. REUTERS/Cho Seong-joon/Pool
"Samsung Group appears to have decided that it would not be appropriate to delay
further given that it is unlikely for Chairman Lee Kun-hee to return," said Kim
Sang-jo, an economics professor at Hansung University.
"The longer this decision is delayed, the longer the absence of somebody who can
take the responsibility and act in response to issues such as the Samsung C&T
merger and the (Note 7) recall issue."
NOTE 7 RECALL
On Monday, Samsung's shares fell 7 percent, their biggest daily percentage drop
in more than 4 years after the tech giant told customers affected by the recall
to switch off and return their new Galaxy Note 7 phone as soon as possible due
to fire-prone batteries.
The recall is unprecedented for Samsung, which prides itself on its
manufacturing prowess. Some analysts estimate the firm might lose $5 billion won
worth of revenue after accounting for recall costs. The company had said it sold
2.5 million Galaxy Note 7s that need to be replaced.
Analysts said the recall could torpedo Galaxy Note 7 sales and have a lasting
impact on the $208 billion company's brand image, which could derail a recovery
in its smartphone market share against rivals like Apple Inc.
"Some said initially the Galaxy Note 7 could be the best smartphone ever, but
now it's possible the phone will go down as the worst ever," IBK Securities
analyst Lee Seung-woo said, predicting weak sales in the fourth quarter.
(Reporting by Se Young Lee; additional reporting by Joyce Lee and Nataly Pak;
Editing by Stephen Coates and Susan Thomas)
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