How Samsung Is Developing Its Next-Generation Leader

Photograph by Paul Sakuma/AP Photo

Lee Jae Yong's rise to Samsung's vice chairman and heir apparent was a long time in the making.

Samsung unveiled its upcoming flagship product yesterday: Lee Jae Yong. He’s the son of company chairman Lee Kun Hee, the billionaire who transformed the former fish exporter into Asia’s largest consumer-electronics company.

Yesterday’s promotion of Lee Jae Yong to vice chairman signals his role as successor to his 70-year-old father, my colleague Jungah Lee reported in Bloomberg News. The elder Lee is chairman.

Even with the Lee family’s iron grip over the South Korean tech giant, engineering a next-generation business leader is no small endeavor. The development process was two decades in the making.

In 1991, Lee Jae Yong joined Samsung Electronics, serving as a vice president of strategic planning and then as chief customer officer. If the latter title sounds kind of made up, well, that’s because it kind of is. The position was created for him and disappeared when he dropped it in 2008 — a period when the Lee Jae Yong project was in jeopardy. His father stepped down as chairman after being charged with tax evasion, taking the son down for a while, too.

On Dec. 15, 2009, Samsung Group seized on an opportunity to revive the succession plan. The company created a new role within Samsung Electronics for a chief operating officer (at least that title was believable) and installed Lee Jae Yong. He was also named executive vice president.

The timing of the management shakeup, when the television and phone maker was thriving, seemed odd. But pushing him into the spotlight just as Samsung Electronics had solidified market dominance had a side benefit. “He can take credit for the company’s financial success,” Kim Sun Woong, head of the Center for Good Corporate Governance, an independent think-tank, told Bloomberg Businessweek then.

Two weeks after the younger Lee’s return to the empire, which accounts for one-fifth of its homeland’s gross domestic product, South Korean President Lee Myung Bak pardoned the elder Lee’s crimes. Three months after that, he was chairman again. Later that year, his only son was promoted again, to president.

Samsung is a dynasty, like it or not (and many in South Korea do not). Lee Kun Hee inherited the group from his father, who founded it in 1938. Now, with the tax scandal behind him and his son’s role seemingly assured, there is one major threat for the nation’s wealthiest man to deal with: the others in his family. His older brother and sister are suing him for at least $850 million worth of Samsung Group shares.

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