BUT WHILE THE CHAIRMAN promulgated an image within the company as a
globally minded leader, behind the scenes he perpetuated a dynastic Korean
tradition. He made it clear he eventually wanted to pass the entire Samsung
empire to his first and only son, Jay Y. Lee (in Korean, Lee Jae-yong), a
dapper and well-spoken doctoral candidate at Harvard Business School.
The former financial executive, Kim Seon-jeong, who was involved in
some of the succession planning, told me that a tranche of high-level
executives were involved in drawing up plans for the sensitive inheritance
process, exploiting legal loopholes, cash gifts, and financial tools like
convertible bonds and bonds with warrants.
“That was the perfect tool for the succession plan,” corporate
governance lawyer Jisoo Lee told me. The plans got under way in early
1995, when Chairman Lee gave a gift of money to his children, which they
used to buy shares in unlisted Samsung holdings at what seemed like
bargain prices.
The companies went public a few months later; share prices jumped on
the open market. The heirs sold them off for a small fortune and used the
lucrative earnings to buy shares in the Samsung Everland theme park. The
succession plan established Everland as the de facto holding company of
the Samsung empire, effectively giving the chairman’s children a vehicle
through which to gain control of the empire’s cross-shareholdings with a
minimal financial stake.
“We knew that this transaction was problematic,” said Cho Seung-
hyeon, a lawyer who challenged the deal with a group of corporate
governance activists. But he failed to get it reversed in the courts. “It was
designed to keep power in the family at any cost.”