Sabotage, espionage, succession battles, and sibling rivalries — it sounds like a season of "Game of Thrones." But it's the real-life drama of the Lee family, the Korean dynasty that founded Samsung with wealth equal to 17% of the country's GDP, according to Bloomberg.
The sprawling Samsung empire, which does far more than just make phones, has grown into its third generation of leadership, with current vice chairman Lee Byung-chul's son, Lee Jae-yong, (although recently indicted for bribery and embezzlement), was poised to build on of his father's foundation.
Of course that's if he scales through this indictment unscathed.
It all started in 1938 with Lee Byung-chul, $25, and dried fish.
The patriarch and progenitor of the Samsung dynasty opened a tiny dry-goods store. Decades later, his son would launch one of the most coveted cellphones on the market, the Galaxy S, into smartphone stardom.
Lee Byung-chul, however, started with $25when he opened that first store.
That $25 would spiral into $529.5 billion in assets by 2014.
In 2012, Samsung's revenue was equal to 17% of South Korea's GDP, according to Bloomberg.
According to Samsung's corporate website, the Lee family has a hand in (but not limited to):
- Smartphones and mobile devices, TVs, cameras, and other consumer products, flagship company Samsung Electronics
- Electronics parts, including lithium-ion batteries, chips, semiconductors, hard drives, and more for clients including Apple, HTC, and Sony, Samsung Electronics
- Clothing and luxury retail, entertainment, and theme parks, Samsung Everland/Cheil Industries
- Hospitality, hotels, resorts, and duty-free shops, Hotel Shilla
- Construction, investment, and trading (which extends the companies control into natural resources including coal and gas, as well as wind power, steel, chemicals, and textiles), Samsung C&T
- Life Insurance, Samsung Life Insurance
- Information technology, Samsung SDS
- Advertising and marketing, Cheil Worldwide
- Shipbuilding, Samsung Heavy Industry
- Surveillance, aeronautics, and weapons technology, Samsung Techwin
The scion of the family and chairman of Samsung electronics: Lee Kun-hee.
He presides over the family owned conglomerate. The structure is called chaebol in South Korea. It's a crisscrossed network of companies where members of the family own a little piece of everything.
It's confusing to say the least — making succession and ownership a little less clear.
For example, Samsung is an affiliate of Cheil but to make succession easier and Cheil announced that it wants to buy Samsung for $9 billion.
In 1956, Lee Kun-hee's younger sister married into the family of powerful Samsung's rival company, LG, but the relationship between the two companies became rocky.
Lee Sok-hee, one of Lee Kun-hee's younger sisters, married a man from the Keumsung household, Bloomberg reported.
It was a happy union — until the Keumsung's family business, LG, became one of the biggest electronic sellers in South Korea. At that point, Lee Byung-chul's relationship with the Keumsung household took a turn for the worse.
Samsung went into expansion mode and acquired the life-insurance company that would become Samsung Life Insurance. It controls Samsung Electronics' stocks.
Lee Byung-chul had his eighth child, Lee Myung-hee in 1943, and as she grew from a toddler into a preteen, Samsung bought its own flour mills and confectionery machines. According to Bloomberg, Samsung acquired Dongbang Life Insurance Co. in 1963.
When Lee Myung-hee neared her late 20s, in 1970, Samsung broke into the electronics business and began building televisions.
But in 1966, a scandal forced Lee Byung-chul to step down. His son was caught smuggling saccharin into the country.
According to the Hankyoreh, a Korean news site, Lee Byung-chul's second son, Lee Chang-hee, smuggled 50 tons of saccharin into the country.
Lee Byung-chul was forced to resign and, as was tradition in South Korea, his eldest son, Lee Maeng-hee, took over in 1967.
The oldest, Lee Maeng-hee, was made the CEO in 1967, but he was unloved.
His leadership style was aggressive and disliked by Lee Byung-chul's closest associates. The Hankyoreh reported that Lee Byung-chul had written in his memoir that Lee Maeng-hee had thrown Samsung into chaos within six months of taking the reins.
About the same time, second son Lee Chang-hee also made a bid for the C-suite by telling the president of South Korea about his father's slush funds in 1969. That got him basically exiled.
Lee Byung-chul, however, suspected Lee-Maeng-hee's involvement, and so both of their names were abruptly slashed from the succession list in 1969.
Lee Chang-hee left for the US, having been more or less exiled by his father.
The Hanyoreh reported that, in "Prince Sado of Samsung," writer Lee Yong-u said that Lee Maeng-hee was tripped up by Lee Byung-chul's advisers, which included Kun-hee's father-in-law.
Lee Byung-chul died in 1987, paving the way for current chairman, Lee Kun-hee's path to power.
Third son Lee Kun-hee was ushered in the next chairman, with some consternation from his siblings when Lee Byung-chul died in 1987.
Lee Byung-chul was rumored to have two other children from an unnamed mistress.
With Lee Kun-hee presiding, his siblings proceeded to split the empire among themselves.
Lee Kun-hee's other sisters, Lee In-hee, who was in charge of Samsung's home-furnishings unit, and Myung-hee, who had Samsung's retail arm, split from the company with their departments in 1991 and 1997, respectively.
Lee In-hee established the Hansol group, now the country's largest paper manufacturer and electronics producer, while Lee Myung-hee created the Shinsegae Group, Forbes reported.
In 1997, CJ Cheil Jedang, selling food and biopharmaceuticals, separated from the Samsung Group. It was headed by Lee Jay-hyun — Lee Maeng-hee's son. According to Forbes, he was charged with theft and embezzlement, and sentenced to four years in prison in 2014.
Some Samsung onlookers think the current generation of Lee's may lead to another split.
Lee Kun-hee convicted, then pardoned
In 1996, Lee Kun-hee was convicted of paying bribes to former presidents Chun Doo-hwan and Roh Tae-woo.
According to The Verge, he was pardoned by then-President Kim Young-sam in 1997.
Owners aside, Samsung continued to climb toward success, developing its first internet-connected smartphone in 1999.
Some 20 million Samsung cellphones were circulating in the US markets by 2004.
In 2007 it happened again. Samsung's chief lawyer told the government about his boss' bribery funds.
In 2007, Kim Yong-chul, Samsung's chief lawyer, told officials of slush funds owned by Lee Kun-hee, which the executive allegedly used to bribe prosecutors, judges, and political figures in South Korea, the Financial Times reported.
Kim Yong-chul claimed the company had trained executives to be scapegoats, should a scandal arise and fingers started pointing toward Lee Kun-hee.
Lee Kun-hee was found guilty, and some became concerned about the power vacuum that would be left behind.
According to the Financial Times, Lee Kun-hee was found guilty of evading $45 million in taxes and was fined about $90 million. It was decided he would go to jail for three years after a five-year waiting period.
He resigned as chairman and publically apologized. At that point, in 2008, Samsung was the largest cellphone producer in the US.
Fortunately, for him, he was pardoned. He returned to the company in a weakened state, though.
He was pardoned personally by the South Korean president in 2009, The New York Times reported. It was likely that Lee Kun-hee could stay on the Korean Olympic Committee.
Lee Kun-hee retook his position as chairman of Samsung Electronics, and, by 2011, the company was making LCD panels, chips, and tablets by the millions monthly.
The first Samsung Galaxy S, the company's high-end smartphone series, was released in 2010. Although it achieved relative success in international markets, with 24 million in sales worldwide by 2012, it fell short in the US and was beat by Apple's iPhone 4 — which sold about 85 million units in roughly the same period, according to Android Authority.
It wasn't until the S3 came out that the Galaxy became a dangerous rival to Apple.
Then the past came back in 2012, and the second generation of the Samsung empire came for a slice of the company.
While Lee Chang-hee died, in 1991, Lee Maeng-hee came back with his sister, Lee Sook-hee (the one who married the LG heir) in 2012 and sought 4.1 trillion won, or $3.54 billion in a lawsuit. He claimed that their father and founder of the empire, Lee Byung-chul, had left a portion of stocks to the two siblings, and Lee Kun-hee had robbed them of their inheritance.
According to Bloomberg, the two asked for a quarter of the chairman's stocks in Samsung Life Insurance — worth about $850 million. Samsung life has controlling stock in Samsung Electronics, and the cut would've relegated the chairman to being second-largest shareholder in the insurance company.
The controversy stirred up speculation at the time that the Samsung conglomerate would be pulled apart again — though it was quashed when a South Korean judge ruled in Lee Kun-hee's favor.
Meanwhile, he had started to groom his own children for business management, especially his only son Lee Jae-yong.
Each of Lees' four children, three daughters and a son, were sent to the US for school. His only son, and heir apparent, Lee Jae-yong, was tapped for taking over.
In 2000, Lee Jae-yong led 14 internet venture companies, with e-Samsung as the largest shareholder — but the companies became insolvent in a year. E-Samsung suffered a 20 billion won loss, or about $18 million. It was a blow to the young heir's credibility.
One of his daughters, 26-year-old Lee Yoon-hyung, committed suicide in New York City in 2006.
So the family tree looks something like this now.
The lowest branches on the tree also have young children of their own, who are kept out of the public eye. Lee Jae-yong has two children, Lee Boo-jin has a son, and Lee Seo-hyun has four children.
According to the Financial Times, Lee Jae-yong was forced to apologize in 2013 after his son's admission to a high-ranking prep school came under scrutiny. Local media claimed Lee Jae-yong's son was admitted with preferential treatment. Lee Jae-yong's son left the school.
Lee Jae-yong, Kun-hee's son, is the automatic heir to his family's empire, being the oldest and only son.
According to Forbes, he studied management in Japan and in the US, and has been named president of Samsung Electronics. Analysts have said his management strategy seems to be an extension of his fathers "change everything except your wife and children" philosophy.
He is largely unproven as an executive, at least to the international crowd.
People have named Lee Boo-jin, the second oldest, as a rival to heir apparent Lee Jae-yong. She has been called the "Little Kun-hee" by the public — which has stirred up rumors.
Lee Kun-hee’s oldest daughter is president of Hotel Shilla and co-president of Samsung Everland, aka Cheil Industries, according to Forbes. She is mainly in charge of the hospitality management side of the business, though she is considered highly capable, having made the duty-free stores in Korea successful.
She persuaded Louis Vuitton to open its first airport store, at Incheon Airport, in 2011.
The youngest, Lee Seo-hyun, is co-president of Cheil Industries.
Lee Seo-hyun is responsible for Samsung's fashion and advertising departments. The 41-year-old's division is in competition with Spanish brand Zara and Japanese brand Uniqlo, the Financial Times reported.
She, like her siblings, has been climbing Samsung's management ladder, which has been interpreted as Lee Kun-hee beginning to transfer power to his children.
Lee Kun-hee had a heart attack in May 2014, leaving son, Lee Jae-yong to take over. The second generation may not be done grabbing power, though.
Samsung was facing increasing pressure from the Korean government to simplify its corporate structure, Bloomberg reported. Others have speculated it would split apart, as it did in 1991 and 1997.
According to the Korea Times, onlookers are watching the current generation of Lee siblings and wondering whether a second power grab is inevitable. But other experts have reasoned that with the way the family has been running the company, a dog fight over power isn't likely.
In 2015 Lee Kun-hee's delicate succession plan was under threat from outside too — from Paul Singer.
Earlier in 2015, Paul Singer, investor activist and CEO of Elliot Management Corp., bought 7.1% of stocks from Samsung C&T, the conglomerate's construction company, and became the company's third-largest shareholder.
Cheil Industries had planned on acquiring Samsung C&T, but Paul Singer filed an injunction to prevent the move, Bloomberg reported. Singer said he believed Cheil Industries' $9.4 billion all-stock offering to be undervaluing C&T, so the merger would be unfair to investors.
To the Lee family, Paul Singer's move was a huge migraine, as the merger would help unwind the web of companies that allows Samsung to hold about 70 companies with 2% of the stakes. Although Elliott Management had voiced its objections on merger of Samsung C&T and Cheil Industries Inc., which was very important for Samsung Group’s reorganization of its management structure, it eventually lost due to lack of number of votes favoring Elliott’s stance.
Uncertain future of Samsung Heir as he is indicted on bribery and embezzlement charges.
The heads of South Korea’s most powerful companies appeared at a parliamentary hearing in Seoul in December as part of a corruption inquiry. The vice chairman of Samsung, Lee Jae-yong, fourth from right, was arrested early in February on bribery charges.
Pool photo by Jeon Heon-Kyun.
Samsung's heir apparent Lee Jae-yong has been formally indicted on multiple charges including bribery and embezzlement.
The case is tied to the scandal which led to the impeachment of the country's president, Park Geun-hye.
South Korea's special prosecutor's office announced the charges against the de-facto Samsung chief, along with four other company executives.
Three of those executives resigned following the announcement.
Samsung also said it was dismantling its corporate strategic office, a unit coordinating the various arms of the huge conglomerate.
Samsung is accused of giving donations ( worth 41bn won ($36m; £29m) to non-profit foundations operated by Choi Soon-sil, a friend of Ms Park, in exchange for government favours.
He had been arrested earlier in the year as prosecutors prepared the indictment. Mr Lee is currently vice-chairman of Samsung Electronics. But since his father, Lee Kun-hee, suffered a heart attack in 2014, he is considered de facto boss of the entire Samsung Group conglomerate.
Regardless of the outcome, a trial is a big blow to the company. His arrest may not affect short term production or the running of the firm but there could be long term implications.
This Article first appeared in Business Insider
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