Samsung’s Lee: tainted titan who built a global tech giant

Lee Kun-hee

Back in the February of 1993, some five years after taking over from his father at South Korea’s Samsung Group, the 51-year-old Lee Kun-hee was frustrated that he wasn’t making his mark.

He summoned a set of Samsung Electronics executives into a Best Buy store in Los Angeles for a fact check on the Samsung brand. Covered in dust, a Samsung TV set sat on a corner shelf with a price tag almost $100 less expensive than a rival Sony Corp model.

After a tense nine-hour followup assembly, Lee kick-started a tactical change at Samsung – to gain market share through quality, not volume.

Lee, who died aged 78 on Sunday after being hospitalised for a heart attack in 2014, was driven with a constant sense of catastrophe, he instilled in his direction teams to induce change and fight complacency. From the mid-1990s, Lee personally remembered around $50 million value of poor quality cellular phones and fax machines, and set fire to them.

This focus on catastrophe, along with his often abrasive fashion, helped Lee grow his dad Lee Byung-chull’s noodle trading industry into a sprawling business empire with assets worth about $375 billion as of May 2020 in heaps of affiliates extending from insurance and electronics to shipbuilding and construction.

Samsung Electronics developed by a second-tier TV manufacturer to the world’s largest technology firm by revenue – viewing off Japanese manufacturers Sony, Sharp Corp and Panasonic Corp in chips, TVs and screens; ending Nokia Oyj’s handset supremacy and beating Apple in smartphones.

In a 1997 essay, Lee remembered his frustration at management inertia.

In 2013, Forbes called Lee as the second most powerful South Korean, ranked only behind United Nations Secretary-General Ban Ki-moon.

Related Article:
Apple, GroupM and others ask for tough protection for data in Google lawsuit

Samsung

FEARED AND REVERED

Four months following the Los Angeles meeting, Lee telephoned his lieutenants into a Frankfurt hotel conference room, where he laid out his “New Management” plan, exhorting executives to “change everything except your wife and children.”

Executive meetings proved brutal, often stretching to 10 hours with participants fearful to drink water as they didn’t want to have to interrupt Lee’s flow by visiting the washroom.

Lee’s business acumen made him the object of endless fascination and speculation from Korea, but he and the empire he built has also been vilified by critics and activist shareholders for wielding such economic clout, hierarchical and opaque governance, and dubious transfers of their household prosperity.

In 2008, Lee was accused of managing a political slush fund and of assisting his children buy Samsung company shares on the cheap. Prosecutors failed to establish either charge, but Lee was convicted of tax evasion and embezzlement. He apologised and resigned, only to return within two years following a presidential pardon.

He had since kept a lower profile and delegated to an army of managers, while boosting his son, Jay Y Lee, to vice chairman, a grooming place for its eventual transfer of power.

As his health deteriorated – Lee wanted help in walking and has been vulnerable to respiratory ailments following lung cancer treatment – he had been a less frequent presence at Samsung’s headquarters, spending summer winter holidays in Japan or Hawaii.

But his hold over the group remained undimmed. Whenever he went abroad, at least four of Samsung’s top executives, along with company crew and security, are in the airport to see him off.

Related Article:
Samsung Group heir questioned by prosecutors over contentious 2015 deal

In Samsung’s human resources development centre, the tens of thousands of employees attending training sessions cover a silent vigil into a mock-up of the drab Frankfurt hotel seminar room – with furniture specially imported from Germany. Because most of Samsung’s 260,886 routine employees, according to South Korea’s Fair Trade Commission, are in their 20s and 30s and didn’t experience Lee’s managerial heyday first-hand, this homage serves to remind them of the requirement to ‘think crisis,” several people who have been educated at the centre said.

JAPAN EXPOSURE

Lee was born in 1942 from the southern Korean village of Uiryeong, the next son of Samsung’s founder. He had been sent to Japan in the age of 11, only after the Korean war ended. His father wanted his sons to learn the way Japan was rebuilding from the ashes of World War Two.

He has admitted to being a loner and found it hard to make friends when he returned into a nation riven with anti-Japanese sentiment. He moved back to Japan to study economics at Waseda University, and then business management at George Washington University in the US.

His early exposure to Japan’s advanced technology caused him to set the basis of Samsung Electronics by forming alliances with the likes of Sanyo, and adopting chip making and TV manufacturing technology.

Lee began his Samsung career in broadcasting, working his way up to group chairman by 1987, breaking with the traditional Confucian clinic of their eldest son taking over the reins. His older brother, Lee Maeng-hee, was initially picked to lead Samsung in 1967 when his father retired, but his aggressive management style caused friction with the founder’s confidants, according to many novels about Samsung.

Related Article:
EU consumer group warns against 'game-changer' Google-Fitbit deal

The second son, Lee Chang-hee, severed family ties by telling the presidential office his father had a $1 million slush fund abroad.

Lee senior exiled Chang-hee to the United States and returned chairman himself. Back in 1976, diagnosed with cancer, he handed down the business to Kun-hee. Chang-hee expired in 1991.

Kun-hee’s hunched position, due to a traffic accident, soft voice, round eyes and frequently bemused expression were irregular for such a strong personality. Married to Hong Ra-hee, who ran a Samsung-affiliated art gallery called the Leeum – a combo of Lee and museum – Lee had a son and three brothers.

His youngest daughter died in New York in 2005, which Samsung said in a car accident but press reports said was a suicide.

Lee had been a part of the International Olympic Committee between 1996 and 2017.

The team at Platform Executive hope you have enjoyed this news article. Initial reporting via our official content partners at Thomson Reuters. Reporting by Miyoung Kim. Additional reporting by Se Young Lee and Joyce Lee. Editing by Ian Geoghegan and William Mallard.

To stay on top of the latest developments across the platform economy and gain access to our problem-solving tools, databases and comprehensive content sets, you can become a member for just $7 per month.

 

Share This Post