Samsung executive shake-up masks potential power vacuum

Samsung shake-up sets company on right course

Shareholders happy with new faces on board

 

All new company bosses face a challenge but the new faces in charge of Samsung seemingly face a less daunting challenge than most. Despite the fact that the current chairman of the company has been hospitalized for three years and his son, the heir apparent, is in jail, things look decidedly rosy.

In normal circumstances, the kind of upheaval at Samsung would normally cause analysts to look concerned and the share price to wobble. This week has seen the heads of the three Samsung divisions: components, consumer electronics and mobile devices all being replaced.  Kinam Kim, Hyunsuk (HS) Kim, and Dongjin (DJ) Koh will succeed vice chairman Oh-Hyun Kwon, presidents Boo-Keun Yoon and Jong-Kyun Shin, respectively.

The shake-up didn’t stop there, the company also unveiled a new CFO, Roh Hee-chan, formerly CFO of Samsung Displays, while the former CFO, Lee Sang-hoon, becomes chairman of the group. That’s another radical change: it’s the first time the company has split the chairman and chief executive officer duties.

It looks disruptive but the company announced an impressive set of financial results earlier this week. The company is sitting on a cash pile of 76 trillion won (£52.22 billion) making it one of the most cash rich in the world. The shareholders are certainly happy right now; the company has massively increased its dividends by 20% and is looking to keep dividends at a high level for the next few years.

So, with profits running high, with booming demand for its core products and piles and piles of cash in the bank, everything seems to be looking good for the new bosses.

It’s more common practice to take command of a business when the situation looks a bit rocky – or at least flat – it’s less common to take the helm when the company is riding at a peak. But appearances can be deceptive – it’s not always easy taking over at the top.

There’s an interesting parallel here with the world of football. Ask David Moyes about the perils of taking on a successful business. When he succeeded Alex Ferguson as Manchester United, he seemingly had it all. The club had just won the Premier League, it was in the lucrative Champions League, had one of the most recognisable brands in world football and was one of the richest clubs on the plant.  Yet within months, Moyes was gone and, even now, four years later, the club has stumbled just below the top level.

The problem that Moyes faced is the same underlying problem that Samsung faces – a previous leader whose influence still holds sway. It wasn’t quite the same thing of course, Ferguson retired to spend more time with his wine collection and racehorses, while Samsung’s co-vice chairman and heir apparent Jay Y. Lee contemplates his five year prison sentence.

Return to the fold

There’s rather too much speculation regarding Lee’s future: is he going to win his appeal and return to the fold? Are the three new divisional chiefs really just keep the seat warm until Lee comes back – even if it’s in five years time? One thing that’s been universally agreed is that Lee will return at some point; his father, the current chairman, has been in a coma since 2014 and all the signs pointed to Lee Jr as being the next leader.

Despite the booming financial results, the path ahead isn’t going to be an easy one. Samsung appears to have shrugged off the difficulties it had with the exploding Galaxy 7 – although it now appears to be running into another set of problems, according to a Samsung forum, with the recently launched Galaxy 8 appearing to be non-responsive. These appear to be isolated problems with the new product and are sure to be resolved, but it does highlight the fact that, in the highly competitive world of mobile phones, just one false move can leave a company looking vulnerable.

What Samsung has going for it is its chips division: the semiconductor business is booming – there’s a growing demand for components for mobile phones and other devices. And while the Android phone business is going to be under competitive pressure from Apple, Samsung neatly hedges its bets by selling components to its US rival. It’s a solid position to be in.

But while the short term business looks positive, the potential for management disruption is great. The three new division chiefs: Messrs Kinam Kim, HS Kim and DJ Koh have had long and distinguished careers in their respective fields but that’s not the same as leading an international company in a competitive market places.

And while the jailed Lee is still in the background, questions are going to remain. Are the three new co-CEOs strong enough personalities to make the right decisions or are they keeping the seat warm for Lee’s return? If the former; will there be a power struggle in the future? If the latter, is there going to be a decision-making vacuum in the interim?

Samsung has two things going for it: the market is strong at the moment, there are little signs of any choppy waters ahead (and even if there were, its cash pile will keep the company afloat).  It’s certainly one differentiating factor from football, where keeping going is not enough.

The second factor in the company’s favour is the presence of Lee-sang Hoon as the chairman – both from the viewpoint of the continuity that he offers and the fact that the separation of the roles of chairman and chief executive (a first for Samsung) will offer better governance, providing greater strength to the company.

These could have been troubling times for the company – and they still could be – but there’s sufficient optimism for the future. Certainly, the shareholders aren’t complaining ... not yet, at least.



Contributer : Techradar - All the latest technology news http://ift.tt/2yq5f61

Samsung executive shake-up masks potential power vacuum Samsung executive shake-up masks potential power vacuum Reviewed by mimisabreena on Friday, November 03, 2017 Rating: 5

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