Samsung Reworks Its Top Echelon -- WSJ

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (November 1, 2017).

SEOUL -- Samsung Electronics Co. shook up its senior ranks on Tuesday in a move that would replace all of its co-chief executives and strip its board chairman of any executive role for the first time as it looks to address concerns about a leadership vacuum at the top.

On the same day it delivered another quarter of record profits, the South Korean technology giant appointed new heads of its three main business lines: mobile, electronics components and consumer electronics.

The new appointees are Kim Ki-nam, 59, for components, Kim Hyun-suk, 56, for consumer electronics and Koh Dong-jin, 56, for the mobile division.

The moves come as Samsung grapples with a leadership crisis. Its chairman is incapacitated, de facto leader Lee Jae-yong is in prison and the conglomerate's powerful strategy group has been disbanded.

Mr. Lee was convicted in August for bribing South Korea's former president. He has appealed the decision and is undergoing a trial in a higher court.

In addition to the personnel shake-up, Samsung said it plans to separate the roles of board chairman and CEO for the first time. Both roles were previously held by Kwon Oh-hyun, who is a co-CEO and whose surprise resignation this month triggered Tuesday's shuffle.

Mr. Kwon's board chair seat is expected to be filled by former Chief Finance Officer Lee Sang-hoon, whose exit from that position was also announced on Tuesday. Mr. Lee is expected to take over as board chairman in March.

When he said he would step down this month, Mr. Kwon called for a fresh start for the company, saying Samsung is "hard-pressed to find new growth areas right now." The new division heads were leaders "well suited to accelerate the pace of innovation and address the demands of the connected world," he said in on Tuesday, adding that they had "proven track records."

But skeptics argued that while Samsung's executive shuffle reinforces the company's strengths, it appeared to fall short of addressing Mr. Kwon's call to seek new growth areas.

Like their predecessors, Messrs. Kim, Kim and Koh have spent more than two decades at Samsung, gradually rising through the ranks in the respective business areas that they will be leading.

"It's hard to see how Samsung will identify new growth areas with these appointments," said Park Ju-gun, head of CEO Score, a Seoul-based corporate research firm.

He added, however, that Samsung may have sought to reassure shareholders when many of its senior leaders are incapacitated or out of the picture.

"Maintaining the status quo may be the way to go at times of risk," Mr. Park said.

Investors cheered the move. Samsung shares rose after the announcement of the executive shuffle, closing up 1.9% at a record high.

Samsung's decision to make Lee Sang-hoon, the former CFO, chairman of the board will strengthen decision making, Mr. Park said. He added that the board would take on some of the functions previously performed by the Samsung conglomerate's control tower, which he said would improve transparency since any board decisions would have to be publicized.

The conglomerate's previous control tower, known as the Future Strategy Group, was criticized for its opacity and lack of accountability to shareholders. Samsung dismantled it this year amid an outcry over its involvement in a wide-ranging political scandal that took down South Korea's former president.

Kim Ki-nam, the new components chief who will oversee Samsung's most lucrative business, is credited within the company with strengthening Samsung's dominance in memory-chip technology.

Mr. Kim has also previously led Samsung's display-making affiliate, Samsung Display Co., as the company's CEO.

Kim Hyun-suk, who will oversee televisions and home appliances as head of consumer electronics, joined Samsung in 1992 and built his career in the company's visual-display business.

Mr. Koh, who will be the new chief executive in charge of mobile, was already one of the company's highest-profile faces, introducing Samsung's flagship smartphones at splashy events. More recently, Mr. Koh bowed in apology during last year's recall of fire-prone Galaxy Note 7 smartphones.

Despite the many changes on Tuesday, some things remain constant, including Samsung's unique system of three co-CEOs, which it has maintained since 2013. The system was created in part to assure competitors that each unit was independent from the other.

The shuffling announcement came hours after Samsung delivered a record quarterly profit for the second time this year, as it continues to cash in on strong demand for its electronics components.

The Suwon, South Korea-based tech giant said third-quarter net profit rose to 11.19 trillion South Korean won ($9.95 billion) from 4.54 trillion won a year earlier.

Write to Eun-Young Jeong at Eun-Young.Jeong@wsj.com and Timothy W. Martin at timothy.martin@wsj.com

(END) Dow Jones Newswires

November 01, 2017 02:47 ET (06:47 GMT)