Samsung heir to head foundations in succession step

Lee Jae-yong, Samsung Group's heir apparent, has inherited the chairmanship of two charitable bodies and investment vehicles from his stricken father, in the latest stage of the South Korean conglomerate's leadership succession.

Lee Kun-hee, Samsung's 73-year-old chairman, has been bedridden since suffering a heart attack in May last year and remains in a semi-conscious state, according to company officials.

On Friday, Samsung announced that 46-year-old Lee Jae-yong would take over the chairmanship of Samsung Life Public Welfare Foundation and Samsung Foundation of Culture, the first positions to pass from father to son.

The foundations are a significant part of the complex shareholding structure that binds together the 74 businesses of Samsung Group and protects the family's control. Their holdings include a combined 6.9 per cent stake in Samsung Life Insurance, which in turn owns 7.6 per cent of group flagship Samsung Electronics.

Lee Jae-yong's inheritance of the roles will heighten speculation about the timing of a formal succession of group leadership, with no sign of a return to active duty by his father.

The key title is the chairmanship of Samsung Electronics, an effectively ceremonial position awarded to Lee Kun-hee without a board vote in 2010, when he returned to the company after a two-year absence following a presidential pardon of a tax evasion conviction.

While he did not take a seat on the company's board, most analysts believe that the elder Mr Lee had strong authority over Samsung through a centralised strategy group whose funding is covered by group affiliates.

If Lee Jae-yong also inherits the top title, as is generally expected, investors are unlikely "to have a strong reaction one way or the other", said Shaun Cochran, head of Korea research at CLSA.

While still officially vice-chairman, Lee Jae-yong has already taken over many of the chairman's public duties, hosting guests such as Chinese president Xi Jinping. Most in Seoul's business community believe he has also assumed responsibility for key strategic decisions that were previously made by his father.

But while the timing of title changes is a minor concern, the issue of long-term leadership is crucial for shareholders, who are trying to assess Samsung Electronics' prospects for growth after a decline in smartphone sales sent operating profit down by 32 per cent last year.

Company insiders say Lee Jae-yong's responsibilities have steadily increased during more than two decades at Samsung Electronics, and that he was partly responsible for the success of Samsung's smartphone division in recent years.

But some investors still consider him unproven, having never had formal charge of a major business unit. Controversy also surrounds the methods through which Lee Jae-yong acquired the business stakes that will allow him to control the group.

Mr Lee acquired large stakes in affiliates Samsung SDS and Samsung Everland through buying convertible bonds at prices well below fair value, according to later court rulings. Both companies listed last year - a move most analysts consider to have been part of the succession process, although the companies said they floated for internal strategic reasons.

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