DIAGRAM DESIGNED BY GORDON BRUCE AND JON CRAINE. USED WITH PERMISSION.Samsung’s ownership structure. Samsung’s theme park, Everland, was the de
facto holding company through which the Lee family held control. In 1996,
Samsung issued a shareholding mechanism called convertible bonds to
Chairman Lee Kun-hee’s children, at a below-market rate. The transfer turned
Jay Lee into a major shareholder, the first of many financial chess moves to
keep control within the Lee family. It also sparked a massive controversy in
South Korea over corporate governance. Two Samsung executives were
criminally convicted for the share sale.A South Korean court later ruled that two Samsung executives had
illegally sold controlling shares in Everland to Jay Lee at a below-market
rate. Although convicted, the two executives did not serve prison time.
Executives at Samsung were extremely loyal to the Lee family, eager to win
the patronage of the chairman.
“They were all sort of falling over themselves saying, ‘It’s my fault,’ ”
Kim Seon-jeong said. “People were lining up to go to jail for [the
chairman].”
What was curious was the fact that the shareholders supported the
succession plan, acting against their own immediate interests, forfeiting
their right to buy the unlisted shares at a market price and therefore
allowing the chairman’s family to take them over.
The chairman, meanwhile, instituted the next phase of Samsung’s global