The Lee family's control over Samsung Group might have to be loosened up as challenges in being the leader in the smartphone industry rises. Bloomberg said the 72 year-old Lee Kun Hee, who had taken over his father 27 years ago and led Samsung to outmanuever Sony Corp, Nokia Oyj and Apple Inc, will have to see his family's position in the business reduced thanks to the massive inheritance taxes and the decreasing support in Korea his heir Jae Yong would be facing.
Samsung is said to one one of the many conglomerates in the country who achieve control through crossholdings. The Lees were able to gain control of Samsing's 74 companies through a web of shareholdings despite owning less than 2% of the total group stock. Professor Kim Houng Yu at Kyung Hee School Of Management in Seoul said that the Lees would have trouble retaining its position in the company should he cross-shareholding structure breaks off.
He said, "Samsung became a world leader only because chairman Lee could keep his management control distant from external influence. Once the cross-shareholding structure breaks off, the Lee family's control over the group will be weakened and they will be left more vulnerable to outside influences."
The pressure itself would be coming from insider the group, Bloomberg said. For example, shareholders would urge Samsung Electronics to increase its dividends as company cash increases beyond its current $58 billion, according to Daishin Securities Co analyst Claire Kim. Moreover, she said that shareholders could also pressure the Lees to cut capital spending or conduct strategy shifts as growth slows down.
As the elder Lee is expected to retire from business life due to a heart attack, it is inevitable that he had to pass the control to his son, of which tax attorney Kim Hyeon Jin at Shin & Kim in Seoul said is no laughing matter. According to the country's law, heirs would need to pay 50% in taxes should they inherit such large amount of wealth, which is touted to be at $6 billion for South Korea. He also said that the law might be a factor for the Lees to consider putting stock into a foundation, or at the very least, reduce control over some of their assets.
