Young industrialists face challenge of proving leadership, strategy

Children of Korean tycoons are stepping up the corporate ladder to face the challenges of proving their inherent leadership and strategic prowess to tide their empires over the tough times.

Following a series of promotions since late last year, the third-generation descendents of the founders of Samsung, Hyundai and top chaebol groups are coming closer to their fathers’ thrones.

When chaebol were mollified years ago amid a series of corruption scandals and business failures, the inexperienced scions symbolized crony capitalism, sidelined from decision-making and forced to keep a low profile.

The young leaders are now coming to the fore magnificently. They are getting more active in crafting long-term strategies and developing new markets. Technology-savvy and educated overseas, many of them are leading efforts to adapt their decades-old businesses to the era of information and ever intense global competition.

Their star power serves as a morale-booster for employees and contributes to the conglomerates’ image among the public.

Lee Jae-yong, heir apparent of Samsung Electronics chairman Lee Kun-hee, has recently been strengthening his role and position as chief operating officer of the technology giant.

The 40-year-old Harvard graduate is the only son of the nation’s richest and most influential industrialist. Particularly since his aging father returned to the chairman post, the junior Lee has proven that he will no longer remain passive. He was the only COO to attend the CEO-level meeting presided over by his father early this month when the company decided to invest a record 26 trillion won ($22.3 billion) in facilities and R&D. The COO showed up during the International Consumer Electronics Show in Las Vegas early this year, demonstrating his management skills and was actively involved in network-building with foreign investors and partners.

As the COO, Lee’s executive authority could go beyond decisions made by presidents of Samsung Electronics’ four major business units including semiconductors, telecommunication networks, liquid crystal displays and digital media, officials at Samsung said.

At Hyundai Kia Automotive Group, Korea’s largest carmaker, Chung Eui-sun, the son of chairman Chung Mong-koo, has already built a strong position. He has built his credential as a future leader while leading Hyundai Motor’s affiliate Kia Motors since 2005. His vision for design has helped Kia, the second-largest carmaker, expand its market share to 31.3 percent from 25 percent last year after introducing a new car lineup including K7, K5 and Sportage R.

The junior Chung has recently presided over a meeting of presidents from the automaker’s overseas offices for the first time. Chung presented Hyundai’s sales strategy for China market by himself at a motor show held in Beijing last month and encouraged employees by showing himself in another motor show held in Busan. The 38-year-old vice chairman has also made his international debut at Davos Forum in January and a motor show held in Geneva in March.

Chung Yong-jin, 39, the son of retail giant Shinsegae chairman Lee Myeong-hee, was promoted to vice chairman late last year, which watchers interpreted as a step closer to taking control of the conglomerate. Chung, ex-husband of the actress Ko Hyun-jung, is also making a friendly gesture to public through iPhone and twitter. He wants to communicate with young people, showing his free and easy lifestyle and character, watchers said.

By communicating with the public through the new IT platform, Chung also wants to show that he is a future leader who carefully listens to his customers and is ready to make changes.

The two daughters of Samsung Electronics chairman Lee Kun-hee, who were typically silent staying behind the spotlight of their elder brother Lee Jae-yong, have started to speak up. Lee’s younger sister, Lee Seo-hyun, was promoted to senior vice president of Cheil Industries and Lee Boo-jin, was promoted to senior vice president of Hotel Shilla. Since joining Hotel Shilla in 2001, the eldest daughter of Lee Kun-hee, has climbed the corporate ladder, being elevated to the posts of vice president and then senior vice president. The revenue of the hotel reached 1.25 trillion won last year after Lee expanded the duty free business under the Shilla badge, reports said.

Chung Yong-jin’s younger sister, Chung Yoo-kyung, was also promoted to executive vice president of Shinsegae Co.

Cho Hyun-ah, 35, the eldest daughter of Korean Air’s chairman Cho Yang-ho, is also busy proving her leadership and management skills. The vice president of in-flight service and catering has upgraded Korean Air’s image and service quality, market watchers said.

Chung Ji-yi, 31, the eldest daughter of Hyundai Group chairwoman Hyun Jeong-eun, was promoted to managing director of Hyundai Ubiquitous & Information Technology, an IT service unit of the group. Group officials say Chung, whose father is the late Hyundai Group chairman Chung Mong-hun, is considered the potential Hyundai Group heir because she is in a good position to observe the group’s internal operations serving as planning chief and managing director.

Although the third generation of chaebol founders has increased their management roles in the companies, they may not appear as adventurous as their fathers or grandfathers, who drove the country’s economic miracle in the 1970s and ’80s, experts said. But the third generations of chaebol, who are highly educated and well-mannered, will be more sophisticated and calculative in managing their empires, said Park Seung-rok, director of Corporate Research Team at Korea Economic Research Institute.

“The characteristics of the third generation are different because the entrepreneurships the market pursues today have also changed. Today, the market does not react even if the CEOs make a bold move,” he said.

“They rather must be considerate whenever they make moves as many more risks exist in the market.”

Other observers, however, addressed concerns of chaebol scions lacking the creative mindset, charisma and work experience at the lower level to take full control over the companies.

“They may look gentle, international and well-mannered. But it is questionable whether they could win recognition from shareholders, the public and their employees as the new leader of the company who may not naturally accept the traditional transfer of wealth no more,” Jeong Sun-seop, president of Chaebul.com, a local website specializing in information concerning these conglomerates.

In companies around the world, particularly North America, the family members of the owner are typically involved in the business but not necessarily serve as CEOs.

“Unlike the past, CEOs in the new era have to be creative and foresighted. With Korean companies aiming to become global companies automatically transferring wealth to their children won’t be the answer,” he added.

By Cho Chung-un (christory@heraldcorp.com)