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Samsung heir under pressure to show greater leadership

SEOUL -- Samsung Electronics' heir apparent Lee Jae-yong is under pressure to show greater leadership in containing the crisis over the termination of its flagship Galaxy Note 7 smartphones.

Analysts say that Lee, whose official title is vice chairman, must show firmer leadership in reforming the tech giant's IT and mobile communications division so that there is no contagion effect from the Note 7 problems. By some estimates, the company could suffer a loss of around 7 trillion won ($6.13 billion) over the crisis.

"Lee needs to take the initiative in patching up the crisis by putting the IT and mobile communications division on the right track," said Park Ju-gun, head of CEO Score, an information provider focused on Korea's top 500 companies. "Jae-yong is also responsible for strengthening the company's manufacturing technology which had been top class under his father's leadership."

Harvard-educated Lee has been leading the nation's largest company by market capitalization and its parent Samsung Group since his father Lee Kun-hee was hospitalized after a heart attack in May 2014. The younger Lee is widely thought to be a down-to-earth leader, but his ability to steer the group out of troubled waters is still in question.

Song Dong-hyun, CEO at Mingle Spoon, a Seoul-based crisis management consultancy, says Lee should be candid about the Note 7's safety issues.

"Vice Chairman Lee should show that he and the company care for customers not only in Korea but also all over the world by letting them know the problems of Note 7 and its ways to fix them," according to Song.

Song says that will be the fastest way to regain customers' trust, which is critical for the company to sell its next model of Galaxy S8 expected in March next year. He believes that Lee may apologize to consumers after he joins the board of directors on Oct. 27. The only son of the ailing chairman was nominated to join the board early September.

Market watchers say Lee must learn from Akio Toyoda, CEO of Toyota Motor, who successfully led the Japanese automaker through a massive recall crisis in the U.S. in 2009 after some of the company's vehicles were found to have faulty brakes. Toyoda apologized to American customers in Congress.

Lee is also under pressure from shareholders. Activist hedge fund Elliott Management, which owns a 0.62% stake in Samsung Electronics, on Oct. 5 called for a reform of the group's corporate structure to make it more transparent. The fund also called for Samsung to pay a special dividend of 30 trillion won from its vast cash pile and accept additional outside directors.

Samsung Electronics shares hit a record-high of 1,706,000 won on Oct. 7 as investors cheered Elliott's involvement. The stock has since retraced some of those gains but closed up 0.82% at 1,590,000 won on Monday, still up 27.79% over the last year.


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