Lee Kun-hee Quits as Samsung Chairman

    April 23, 2008 07:33

    Samsung Group chairman Lee Kun-hee, who has led the country's biggest enterprise for 21 years, stepped down from the group chairmanship on Tuesday. Lee took over the conglomerate in 1987 after his father and Samsung founder Lee Byung-chull died. His only son Jae-yong, who is at the center of a controversy over an alleged underhanded transfer of group control, will also step down as a chief customer officer of Samsung Electronics.
    Lee Jae-yong will work at an overseas branch of the conglomerate to "learn about management."
    Flanked by some 30 Samsung executives, Lee Kun-hee held a press conference at the conglomerate's headquarters building in Taepyeongro, Seoul on Tuesday morning, where he announced his resignation and a reform program for the conglomerate. "I feel regret, as I still have a long way to go and have a lot of work to do,” he said. “But I will take all responsibility for all wrongdoings of the past, both legally and morally, for the issues raised by the special counsel inquiry."

    Lee was indicted last week after a 99-day inquiry after the group's former chief attorney Kim Yong-chul alleged the operation of borrowed-name accounts hiding massive funds.

    Samsung Group chairman Lee Kun-hee and other Samsung executives bow after announcing Lee's resignation at company headquarters in Taepyeongno, Seoul on Tuesday.

    Lee also resigns all other posts in the Samsung Group, including the chairmanship of Samsung Electronics and the Samsung Culture Foundation, and will not take up the customary post of honorary chairman. The group will disband the strategic planning office, which ran the dubious accounts and planned the underhand transfer of group control to Jae-yong. Vice chairman Lee Hak-soo, who masterminded the strategic planning office, and president Kim In-joo will also step down by the end of June after winding up remaining business.

    The group's council of chief executives will discuss development of new projects or new massive investment. But with Lee out, it will be difficult for the group to make bold investment decisions. Observers expect Samsung's global competitiveness to weaken in the immediate aftermath.

    Lee said he will pay tax on about W2 trillion (US$1=W997) worth of the borrowed-name accounts, for which the special counsel charged him with tax evasion, and seek ways to spend the residue from the accounts on social welfare.

    But he will deposit W2.5 trillion of stocks and bonds of Samsung Life Insurance into his own accounts in preparation to defend his management right. His son will also be allowed to maintain his stakes in Samsung subsidiaries. There will thus be no conspicuous change in the Lee family's asset holdings and control of the group.

    Lee also promised to sell within four to five years Samsung Card's 25.64 percent holdings of stocks in Everland, the conglomerate’s quasi-holding firm, to put an end to the old practice of Byzantine circular equity investments in subsidiaries -- Everland, Samsung Life Insurance, Samsung Electronics, Samsung Card and Everland again.

    Samsung Group has appointed Lee Soo-bin, chairman of Samsung Life Insurance, as the group's representative after Lee leaves. Samsung's subsidiaries pledged to strengthen their own autonomous management system.

    Samsung wants to inject fresh air into the group in May in this year's personnel reshuffle for executives and its business and investment plan, which it has delayed due to the inquiry. The group will finish the reform program by the end of June.

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