(Bloomberg) -- Jay Y. Lee has been groomed for decades to take over Samsung Group, the conglomerate founded by his grandfather and built by his father into a technology giant. Yet even after the death of Lee Kun-hee on Sunday, his only son will likely have to wait a bit longer for his ascension.
The younger Lee is in the midst of two trials over allegations he used bribery and accounting trickery to smooth his succession. While he has repeatedly denied wrongdoing, Lee faces the possibility of returning to jail if he is convicted. Samsung may hold off on naming Lee to his father’s role as chairman of Samsung Electronics Co. at least until the first trial is completed in the coming months, avoiding a scenario where the newly minted chairman goes to prison.
That means Samsung would operate without a chairman for at least a few more months, a lack of clear leadership that could hurt many companies. But Samsung Electronics has respected executives who run the key operations, and Lee already holds the title of vice chairman to make broader, strategic decisions as needed.
“I think Jay Y. Lee will be promoted to chairman early next year,” said Lee Sang-hun, analyst at HI Investment & Securities. “He might also wait until the bribery case is finalized.”
Samsung declined to comment. The company hasn’t said who will take over the chairman position or when.
The timing of Lee’s formal ascension is sensitive given how public dissatisfaction with the country’s powerful conglomerates, or chaebols, has grown in past years. That backlash stems in part from the high-profile allegations of graft against Lee, which triggered the impeachment of then-President Park Geun-hye.
Also complicating the succession is an enormous inheritance tax bill the Lee family will have to pay, possibly loosening their control over the conglomerate. The elder Lee had an estimated fortune of $20.7 billion, according to the Bloomberg Billionaires Index, and could owe about $10 billion because of the country’s high rates.
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Most families choose to pay such taxes in cash rather than in stock to maintain control, said Chung Sun-sup, chief executive officer of Seoul-based corporate-analysis firm Chaebul.com. They can take five years to make the payments, he said.
There’s little doubt the 52-year-old Lee will succeed his father eventually. The younger Lee, who is trilingual, studied at Japan’s Keio University and Harvard Business School after receiving an undergraduate degree from Seoul National University, the nation’s top school. He has brought a more global approach to Samsung’s management, forging relationships with key partners like the late Steve Jobs.
While Samsung Electronics is best known globally for its smartphones and appliances, it makes most of its money by supplying companies like Apple Inc. with components such as memory chips and panels.
Chang Sea-Jin, a professor at the National University of Singapore Business School, said the alternatives to simply promoting Lee may be worse. Naming an interim chairman from the Samsung executive ranks, for example, would complicate decision making by adding an extra management layer, he said. There would be valuable clarity in Lee taking on his father’s role, he said.
“I think he should take the chairmanship now,” said Chang. “Whatever the circumstances, he has to make the decisions.”
Samsung can’t afford to drift. The company faces renewed challenges from Apple and the rise of tough Chinese competitors in smartphones, along with chronic pricing difficulties in memory chips. Samsung is also embarking on expensive initiatives in fifth-generation wireless technology and the semiconductor foundry industry. Samsung Electronics reports results Thursday.
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Chang pointed out that Lee wouldn’t have to run individual business units because of the professional managers who steer the operations. That’s a marked contrast to the early days of his father’s tenure, when the elder Lee got deeply involved in key divisions.
“He doesn’t have to be another Lee Kun-hee; they have much stronger professional management,” Chang said. “He should be a different kind of chairman than his father.”
Lee’s legal troubles could drag on for years. A retrial of bribery and corruption allegations will unfold this year, with a decision likely early next year. A newer case about alleged accounting wrongdoing will get under way again in January and will likely take months.
Such prosecutions don’t carry the same kind of stigma in South Korea as they do in many other countries. Lee Kun-hee was convicted twice -- and pardoned twice. The chairman of SK Group was also jailed in 2013, then returned to his company in 2016 where he remains at the helm.
Chang joked that prison is almost like “graduate school” for the country’s business leaders.
“Eventually we should move away from this environment in South Korea and have the same standards as other countries,” he said.
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