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

Samsung E&A Co

25/10/2020 22:01

(Repeats Sunday story with no change to text)
    By Miyoung Kim
    SEOUL, Oct 25 (Reuters) - In February 1993, five years after
taking over from his father at South Korea's Samsung Group,
51-year-old Lee Kun-hee was frustrated that he wasn't making his
mark.
    He summoned a group of Samsung Electronics  005930.KS 
executives to a Best Buy store in Los Angeles for a reality
check on the Samsung brand. Covered in dust, a Samsung TV set
sat on a corner shelf with a price tag nearly $100 cheaper than
a rival Sony Corp  6758.T  model.
    After a tense nine-hour follow-up meeting, Lee kick-started
a strategic shift at Samsung - to gain market share through
quality, not quantity.
    Lee, who died aged 78 on Sunday after being hospitalised for
a heart attack in 2014, was driven by a constant sense of
crisis, which he instilled in his leadership teams to drive
change and fight complacency. In the mid-1990s, Lee personally
recalled around $50 million worth of poor quality mobile phones
and fax machines, and set fire to them.  urn:newsml:reuters.com:*:nL1N2HG00U
    This focus on crisis, and his often abrasive manner, helped
Lee grow his father Lee Byung-chull's noodle trading business
into a sprawling business empire with assets worth about $375
billion as of May 2020 in dozens of affiliates stretching from
electronics and insurance to shipbuilding and construction. 
    Samsung Electronics developed from a second-tier TV maker to
the world's biggest technology firm by revenue - seeing off
Japanese brands Sony, Sharp Corp  6753.T  and Panasonic Corp
 6752.T  in chips, TVs and displays; ending Nokia Oyj's
 NOK1V.HE  handset supremacy and beating Apple Inc  AAPL.O  in
smartphones.
    In a 1997 essay, Lee recalled his frustration at management
inertia. "The external business environment was not good ... but
there was no sense of anxiety within the organization, and
everyone appeared to be eaten up with self-conceit ... I needed
to tighten them up a bit and repeatedly reminded managers of the
need to have the sense of crisis."
    In 2013, Forbes named Lee as the second most powerful South
Korean, ranked only behind United Nations Secretary-General Ban
Ki-moon.
        
    FEARED AND REVERED
    Four months after the Los Angeles meeting, Lee called his
lieutenants to 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 afraid to even 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 in Korea, but he and the empire he
built have also been vilified by critics and activist
shareholders for wielding such economic clout, hierarchical and
opaque governance, and dubious transfers of the family wealth.
    In 2008, Lee was accused of managing a political slush fund
and of helping his children buy Samsung company shares on the
cheap. Prosecutors failed to prove either charge, but Lee was
convicted of tax evasion and embezzlement. He apologised and
stepped down, 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 promoting his son, Jay Y. Lee, to vice
chairman, a grooming post for the eventual transfer of power. 
    As his health deteriorated - Lee needed help in walking and
was susceptible to respiratory diseases following lung cancer
treatment - he was a less frequent presence at Samsung's
headquarters, spending long winter vacations in Japan or Hawaii.
    But his hold over the group remained undimmed. Whenever he
travelled overseas, at least four of Samsung's top executives,
along with company crew and security, would be at the airport to
see him off.
    At Samsung's human resources development centre, the tens of
thousands of employees attending training sessions pay a silent
vigil to a mock-up of the drab Frankfurt hotel conference room -
with furniture specially imported from Germany. As most of
Samsung's 260,886 regular staff, 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 need to 'think crisis," several people who have been
trained at the centre said.
        
    JAPAN EXPOSURE
    Lee was born in 1942 in the southern Korean village of
Uiryeong, the third son of Samsung's founder. He was sent to
Japan at the age of 11, just after the Korean war ended. His
father wanted his sons to learn how Japan was rebuilding from
the ashes of World War Two.
    He has admitted to being a loner and found it tough to make
friends when he returned home to a country riven with
anti-Japanese sentiment. He went back to Japan to study
economics at Waseda University, and then business management at
George Washington University in the United States.
    His early exposure to Japan's advanced technology led him to
establish the basis of Samsung Electronics by forming alliances
with the likes of Sanyo, and adopting chip making and TV
manufacturing technologies.
    Lee began his Samsung career in broadcasting, working his
way up to group chairman by 1987, breaking with the traditional
Confucian practice of the eldest son taking over the reins. His
older brother, Lee Maeng-hee, was initially chosen to lead
Samsung in 1967 when his father retired, but his aggressive
management style caused friction with the founder's confidants,
according to several books about Samsung. 
    The second son, Lee Chang-hee, severed family ties by
telling the presidential office that his father had a $1 million
slush fund overseas.
    Lee senior exiled Chang-hee to the United States and
returned as chairman himself. In 1976, diagnosed with cancer, he
handed the business down to Kun-hee. Chang-hee died in 1991.
    Kun-hee's hunched posture, due to a traffic accident, soft
voice, round eyes and often bemused expression were atypical for
such a powerful character. Married to Hong Ra-hee, who ran a
Samsung-affiliated art gallery called the Leeum - a combination
of Lee and museum - Lee had a son and three daughters. 
    His youngest daughter died in New York in 2005, which
Samsung said at a car accident but media reports said was a
suicide.
    Lee had been a member of the International Olympic Committee
between 1996 and 2017.

($1 = 1,127.9500 won)

 (Reporting by Miyoung Kim; additional reporting by Se Young Lee
and Joyce Lee; Editing by William Mallard)
 ((miyoung.kim@thomsonreuters.com)(822 3704 5651)(Reuters
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