Jay Y. Lee’s Troublesome Ascension to the Top of Samsung

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Jay Y. Lee’s Troublesome Ascension to the Top of Samsung

Samsung feels synonymous with South Korea. The revenue of the chaebol—family-run business—is equal to about 25 percent of the country’s GDP; it’s a vital cog in the Korean economy. So when its vice chairman Lee Jae-yong, often referred to as Jay Y. Lee by the English-speaking press, was arrested for Samsung’s involvement in a clandestine corruption scandal that ensnared President Park, it rocked the conglomerate. Samsung, it appeared, was not so untouchable in its homeland after all.

Park was ultimately impeached but the case has also shined a big spotlight on how Samsung is run by the Lee family, which has handed down the reins of power from generation to generation.

His father, Lee Kun-hee, is the actual chairman of the Samsung Group but the 75-year-old magnate suffered a heart attack in 2014 that has left him indisposed and his son Jay Y. Lee as effectively the head of the group.

Lee Kun-hee himself has been dogged by controversy; he resigned in 2008 over a tax evasion scandal. However he was ultimately pardoned by then-president Lee Myung-bak and the brazen chairman would return to his post a mere two years later.

Samsung was founded in 1938 by Lee Byung-chul (Jay Y. Lee’s grandfather) and the Lee family’s hold on Samsung has weathered many storms in that time to become a bulwark of South Korea’s economy, an empire that awaits Jay Y. Lee.

Before being thrust into the limelight against his will in January, Jay Y. Lee was a particularly private man. He rarely gave interviews and typically avoided the eyes of the public, preferring a guarded, behind-the-scenes approach.

Insiders from Samsung have described the vice chairman as being quiet but resolute and determined, through concrete examples of Lee’s leadership in action are hard to pin down. He has been criticized as being inexperienced for the high profile roles he’s taken, accused of outright nepotism via his father and grandfather. This is true in many regards but it may have also created a chip on the shoulder of Jay Y. Lee—the desire and need to prove he is good enough.

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Photo by Pool / Getty Images.

All of this has created an air of mystery around a man dubbed the “Crown Prince of Samsung”. With a net worth of around $6.4 billion, making him the 40th most powerful person in the world (according to Forbes), people have always been itching to know more about Samsung’s heir apparent.

Divorced and a father of two, Lee is the only son of Chairman Kun-hee and has two sisters. He had a third sister, Lee Yoon-hyung, the youngest of the family, who took her own life in 2005 at just 26.

Born in the US, Jay Y. Lee returned to South Korea where he was educated and earned his master’s in business administration. He would pursue a PhD at Harvard but never completed the course.

Despite this, his place in the Samsung kingdom alongside his father was never in doubt. He first began working for the conglomerate in 1991, serving under various VP and officer roles, including chief customer officer, a position that some critics say was invented just for him.

While Lee always seemed to be on track to take the bridles from his father at the upper echelons of the Samsung Group, this has not been without twists and turns and diversions.

In 2009 he was appointed COO of Samsung Electronics. His ascent to this role came at a pivotal time. It was during the early salvos of the smartphone wars. A mere two years earlier, Apple released the first iPhone, prompting a battlefield that has become very crowded ten years later. However two names remain at the top of the heap—Apple and Samsung— seemingly joined together forever. They’ll always be rivals. This was where Lee’s chops would now be put to the test.

The same year as his appointment as COO, Samsung released the first Galaxy smartphone, a less than stellar installment in Samsung’s track record. It of course ran Android but wasn’t compatible with updates to Android 2.0, which came along in late 2009, making the company’s first foray into smartphones a bit of a dud.

The Samsung Galaxy S came in June 2010 and it would be bittersweet for Samsung and the Lee family. It received positive reviews for the most part and would kick-start a product range for Samsung that remains one of its flagships to this day. However less than a year later, its nemesis Apple filed a patent suit against the Korean giant for infringing on Cupertino’s touchscreen design. It was the first major blow in a hostile, seemingly bottomless, run of litigation in courtrooms across different continents that began back in 2007. Samsung sued Apple. Apple sued Samsung. Repeat.

The Galaxy S infringement—the centerpiece lawsuit—was even reopened in January with Samsung anticipated to pay out almost $400 million in damages.

While this battle raged in the courtroom, Lee’s trajectory to the throne remained on course.

In 2012 he was appointed vice chairman, the role he holds today. That same year, Samsung took the top spot in mobile phone market share, knocking the wilting Nokia from its perch.

Since then Samsung has enjoyed success until recently when it met a series of blunders and controversies.

It maintains its place at the top of the phone business with a market share of just over 20 percent as of the end of 2016 (Apple moved into second place in 2014 and remains hot on its heels) and devices like the Samsung Galaxy S5 released in 2014 sold relatively well but they have been unable to stop the march of Apple.

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Things came to an embarrassing head last year with the Samsung Galaxy Note 7. The now infamous smartphone was intended to counteract the iPhone 7 but a faulty battery that caught fire led to a global recall and Samsung found itself at the butt of lawsuits and memes alike. The Jay Y. Lee-led Samsung placed the blame on incorrectly sized batteries that caused the overheating.

The incident pushed the usually discreet Lee onto the podium to explain the bungle. While he may have shown leadership and drive in offices and private meetings, this was a rare chance to see him in a very public space addressing a very public matter that directly affected consumers and not just shareholders.

For some observers, the recall seemed poised to hinder Jay Y. Lee’s rise but nevertheless he still seized more power in the chaebol. In October, right in the middle of the debacle, Lee was appointed as a director on the board of Samsung Electronics, putting him at the head of the conglomerate in a much more official capacity. The nine-person board has the final say over business strategy, restructuring, and mergers.

You would think that Lee would be celebrating but in keeping with the tumultuous environment surrounding Samsung, the same day he was appointed to the board, the company’s market value dropped $15 billionthanks to the Note 7.

Lee has also been in charge of the company while it tries to restructure some of its core businesses. Around this time, it sold its printer business to HP for over a billion dollars and most recently it paid $8 billion for connected car parts maker Harman, indicating where Samsung may see its future.

Jay Y. Lee joining the board was a significant step for his ascension but it means that he is under greater scrutiny and criticism than ever before.

Then just a few weeks in and settling into his newfound authority, Samsung was flung chaotically into President Park’s impeachment and South Korea’s graft scandal.

Jay Y. Lee’s trial is the biggest of its kind and unique in so many ways. Corruption and bribery scandals aren’t new of course but it’s a case where the young Lee could be hoisted out of power and Samsung may very well contend with a conglomerate without a Lee in charge.

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