Lee Byung-chul — or B.C. Lee, as he is often called — set up a dried fish shop called Samsung Sanghoe in 1938. Over the next four decades, he built the foundations of the South Korean conglomerate we know today. We tell the story of B.C. Lee’s career here. It came to an end when he died of lung cancer in November 1987. Twenty-five minutes after his last breath, Samsung had a new chairman. It was B.C. Lee’s third son, Lee Kun-hee.
This might give you the impression that succession in Samsung was a peaceful, orderly matter. It was not. A corporate governance lawyer who had interacted with Samsung at shareholder meetings compared succession at the conglomerate to a royal tussle for power:
“I think they [Samsung] are mimicking exactly the old ways…If you look at the first king of [Korea’s] Yi dynasty, Taejo, he had eight sons, and there was this battle between the fifth and the youngest son…The fifth son later became the third king of the Yi dynasty. But he had to fight against his father’s decision to make the youngest son the crown prince.”
The power struggle at Samsung didn’t begin with B.C. Lee’s last breath. It had been simmering for years before his passing. This is the story of how it evolved, eventually shaping the very future of South Korea’s corporate landscape.
B.C Lee, much like the first king of the Yi dynasty, also had eight children — five daughters and three sons. All his sons married into powerful families: his oldest son, to the daughter of an insurance executive and provincial governor; his second son, to the daughter of a Japanese businessman; and his third son — the future chairman of Samsung — to the daughter of a presidential cabinet member named Hong Jin-ki.
The marriage of Lee Kun-hee to Hong Jin-ki’s daughter gave Samsung access to players at the highest levels of Korea’s government. B.C. Lee and Hong Jin-ki grew close, their relationship deepening when B.C. founded a newspaper — called JoongAng Ilbo or the “The Central Times” — and hired Hong to run it. JoongAng Ilbo was presented as a publication that reported the news while also representing the country’s “corporate voices”. In reality, it was a way for Samsung to defend itself from political attack, with Hong playing the role of court whisperer.
The political climate in South Korea during these years was tense. Just four years earlier, General Park Chung-hee led a military revolution in the country. B.C. Lee, who was in Japan at the time, was summoned home. To the new government, he was a symbol of everything wrong with corporate South Korea: concentrated wealth, unchecked power, and corrupt ways. He topped their interrogation list. On returning to Seoul, B.C. was called to appear before the Supreme Council for National Reconstruction. General Park was present. He laid out two choices: B.C. could hand over a significant portion of the three banks he owned to the state, pay $4.4 million in unpaid taxes and penalties, and align Samsung with Park’s nationalist vision for economic development—or he could go to jail. B.C. Lee chose the first option.
B.C. Lee was the first chairman of the Federation of Korean Industries, a council of business leaders that formed to align their commercial interests with the new military regime. In 1966, lobbying through this group, President Park got Samsung to build a brand new fertiliser plant in South Korea. Time magazine reported:
“In the coastal city of Ulsan last week, old and new Korea came into symbolic confrontation. The spring mists filtering across the landscape were mixed for the first time with ammonia clouds, and Korean farmers wearing traditional costumes stood side by side with businessmen and government officials in trim, Western-style business suits. All had gathered for the dedication of the Korea Fertilizer Co.’s new urea plant, which, with an annual capacity of 330,000 tons of fertilizer, will be one of the world’s largest.”
It was later discovered that during the construction of the plant, chemicals imported to make fertiliser were sold to a saccharin-processing firm at a $40,000 profit. A saccharin-processing firm that was controlled by B.C. Lee’s family. This caused a national scandal because it was perceived as a blow to the country’s efforts at stamping out corruption. A politician from the opposition reportedly screamed “eat this saccharin” as he threw a can of human excrement on the parliament floor. The people wanted heads to roll. B.C. Lee’s second son — Lee Chang-hee — was found responsible for the sale of the chemicals and sentenced to five years in jail. In an attempt to win his son leniency, B.C. Lee stepped down as chairman of Samsung and ceded 51% of the fertilizer plant to the government.
In his absence, B.C. Lee appointed his first son, Lee Maeng-hee, to run Samsung, following Korean tradition that the eldest son inherits the family business. But Lee Maeng-hee, as a grandchild of B.C. Lee later put it, was “a troublemaker”. He was rumoured to be an erratic and violent leader — a poor fit to lead a growing conglomerate. Maeng-hee himself later admitted to a journalist that he had once forced Hong Jin-ki, the respected court whisperer, to kneel before him.
News of incidents like this reached B.C. Lee — and he was not happy. B.C. reinstated himself as chairman of Samsung in 1968. He later wrote in his memoir:
“I gave part of the group’s management to my oldest, Maeng-hee. And before even six months had gone by, the entire group was in chaos.”
When Lee Chang-hee was finally released from prison, he expected to be welcomed back into the fold. He was disappointed. Henry Cho, one of B.C. Lee’s grandchildren said:
“[H]is father refused to let him take over the company. He was a very good entrepreneur but according to my grandfather [B.C. Lee], he was [too] much into details and small in scale [in his thinking].”
Chang-hee wasn’t just disappointed, he felt scorned. He penned a vengeful letter to President Park, the leader of the military regime, revealing the dirty details of the assets held by B.C. Lee, including a million dollar overseas slush fund. His father was livid. B.C. banished Chang-hee to the United States, instructing him not to return to Korea in his lifetime. Some sources speculate that B.C. believed Maeng-hee was also involved in the betrayal, widening the schism between father and eldest son. In an unofficial biography of Maeng-hee, the author claimed he failed in his bid to lead Samsung owing to a conspiracy designed by those close to B.C. Lee, including Hong Jin-ki. This book is called “Prince Sado of Samsung,” a reference to another dynastic tragedy: Prince Sado, a 27-year-old feudal heir accused of being mentally ill, who was locked up inside a rice chest and left to die — on the orders of his father.
As a result, when B.C. Lee was diagnosed with cancer in 1976, he formally named his third son, Lee Kun-hee, as his successor. When B.C. died at at 5:05 PM on November 18, 1987, the presidents of Samsung’s 37 affiliates gathered at the headquarters and unanimously voted Lee Kun-hee as the next chairman. B.C. Lee’s empire was divided among his children as follows:
Lee Kun-hee inherited the crown jewel, Samsung Electronics
Lee Maeng-hee received the food and snacks business, Cheil Jedang
Chang-hee Lee was given the VHS tape company, Saehan.
In-hee Lee, B.C.’s eldest daughter, took over the paper and chemicals company Hansol (then called Jeonju).
Myung-hee Lee, the younger daughter, inherited the department store chain, Shinsegae.
In Samsung Rising, journalist Geoffrey Cain writes: “These five companies touched almost every facet of South Korean life. Much of the South Korean economy, in fact, was centered around Samsung and B.C. Lee’s clan.”
It might be worth noting that Samsung’s semiconductor business owed its existence, in large part, to Lee Kun-hee. He wasn’t an entirely undeserving heir. B.C. Lee wanted to shut the semiconductor division down in the 1980s, and it was Lee Kun-hee who changed his mind. So strong was Lee’s conviction that he travelled to Japan to meet semiconductor experts almost every week. He even flew Japanese experts to South Korea in secret to teach his engineers.
In any case, the succession drama didn’t end after Lee Kun-hee became chairman. People who the new chairman saw as potential rivals were “purged” from the family. In Samsung Rising, Cain writes:
“Henry Cho [one of B.C. Lee’s grandchildren], my contact, had long been close to Chairman Lee II [Lee Kun-hee]; he had lived with the young scion in Japan during his days as an undergraduate economics student at Waseda University. He was playing golf with his colleagues at Samsung’s Anyang course after Lee was named chairman, when the manager of the club approached the green. You guys are no longer members, the manager told the group. They were asked to leave. The fact that Henry and the chairman were close friends didn’t matter. And that was how Henry knew he was out.”
Nearly a decade after Lee Kun-hee was named chairman, in 1995, a video camera was set up on his roof — apparently to surveil the nearby home of his estranged elder brother Maeng-hee.
The feud intensified in 2012 when Maeng-hee filed a lawsuit against Lee Kun-hee to claim a portion of his inheritance, including stocks in Samsung Life Insurance and Samsung Electronics. He lost in lower courts and eventually dropped the case. The Korea Times reported that:
“A ruling against the 71-year-old [Lee Kun-hee] would have weakened his control of the conglomerate and could have forced a reshuffling of Samsung Group's complex cross-share governance structure that involves affiliates Samsung Card, Samsung Everland, Samsung Life Insurance and Samsung Electronics.”
Jasper Kim, a professor of international business law and finance at a South Korean university explained: “It’s generally not in one's favour to bet against the House of Samsung and the chairman for domestic legal issues — where such influence often transcends economic borders into legal ones.”
The bad blood didn’t end in court. Cheil Jedang — Maeng-hee’s company — told the police it had video evidence of a Samsung employee tailing a rival family member (Lee Kun-hee’s nephew). Samsung denied the accusation, but four of its employees were indicted and fined, though not convicted.
While Samsung’s core electronics business remains in the public spotlight, here are notes on the quieter corners of the group.
Cheil Jedang
Cheil Jedang, the part of Samsung’s empire that Maeng-hee inherited, had been set up in 1953 as a sugar refinery. Cheil Jedang literally translates to “First Sugar,” and was also Samsung’s first foray into manufacturing.
Over the next three decades, the company — abbreviated to CJ — expanded into flour, flavor enhancing seasonings like MSG, animal feed, cooking oils, and meat processing. In 1978, CJ opened a food research lab that preempted its entry into pharmaceuticals. What began with food-based products like artificial sweeteners quickly evolved, and by 1986, CJ was producing its own hepatitis B vaccine.
Still, by the 1980s — when B.C. Lee formally named Lee Kun-hee as his successor — CJ had faded in prominence within Samsung’s portfolio. It couldn’t compete with the rising power of Samsung’s electronics division.
Maeng-hee was devastated when his father named Lee Kun-hee chairman in 1976. “By that time,” he said later, “there was already a schism between my father and me, but I had still believed that he would someday pass the reins of Samsung to me.” After that, Maeng-hee went into virtual exile in a fishing village. He grew increasingly paranoid, told people his father had cut him off, and was rumored to be mentally ill. Maeng-hee inherited CJ nonetheless, and in 1993, passed it down to his children: Miky Lee and Jay Lee.
Miky, the more visionary of the two, set her sights on entertainment and film. In the mid-1990s, she led CJ in a bold $300 million investment in DreamWorks, the new production company formed by Steven Spielberg and others. Samsung had also been eyeing a stake in DreamWorks, but its deal fell through, and Miky’s success effectively severed CJ’s remaining ties with the Samsung empire.
By 1996, a series of corporate maneuvers had unravelled CJ’s cross-holdings with Samsung and its affiliate companies. That year, it formally launched as the Cheil Jedang Group, and Miky founded CJ Entertainment — an in-house production company which would go on to produce one of South Korea’s first blockbuster films.
CJ’s identity has shifted over time, but its appetite for diversification seems intact. Today, CJ Group’s website describes its business portfolio as having “four core sectors — Food & Food Service, Biotechnology, Entertainment & Media, and Retail & Logistics.” Their objective is to create products that promote a healthy, happy, and convenient lifestyle; while also promoting Korean culture across the globe. An example of this is Miky Lee herself who serves as a trustee at prestigious American music school, Berklee University.
Saehan
Saehan — the business inherited by Lee Chang-hee — was one he had built from the ground up. In 1967, he launched a cassette tape venture called Magnetic Media Korea as a joint venture with U.S. Magnetic Media. The business grew over the next two decades: Saehan Electronics was acquired in 1977, the shares of the US joint venture partner bought out in 1979, Saehan Media launched in 1980, and a foray into chemical fertilizers — of all things — in 1985.
After Lee Chang-hee’s death in 1991, his wife took over the business and expanded into telecommunications and logistics. In 1997, the Saehan Group was launched, and a year later, designated by the Fair Trade Commission to be a “large conglomerate”. Things were looking up but, in the same year, the group’s main video tape and textile businesses were hit by the Asian financial crisis.
The Saehan Group never recovered. Crushed under mounting debt and abandoned by Samsung — then under the leadership of Lee Kun-hee — Lee Chang-hee’s family was ultimately forced to surrender their assets and step away from management. This unfortunate group is described as the “sore finger of the Samsung family”.
Hansol
Hansol, the business inherited by B.C. Lee’s eldest daughter In-hee, began as a paper production company. It was founded in 1965 under the name Jeonju, and went on to bear many notable “firsts”: the first Samsung group company to be listed, the first in the country to achieve one million tonnes in paper production, the first to develop thermal paper in Korea.
In 1991, Hansol was officially spun off from the Samsung Group to be managed independently by In-hee’s side of the family. Over the following years, it diversified into chemicals, afforestation, and home decor, among other businesses. In the 2000s, Hansol launched a logistics division and announced a new “digital management” philosophy. Its logistics arm went on to develop the world’s first intelligent delivery system. Today, Hansol has 12 affiliates and ranks among South Korea’s top 50 companies. It is recognized as an industry leader in both materials — such as paper and chemicals — and in integrated solutions like logistics.
Shinsegae
Shinsegae — the company inherited by B.C. Lee’s younger daughter, Myung-hee — was originally the Korean branch of a Japanese department store chain. B.C. acquired it in 1945 and renamed it Donghwa Department Store. In 1963, it took on a new identity: Shinsegae, meaning “new world.”
The store lived up to its name. At a time when retail work was viewed as shameful in Korean society, Shinsegae reimagined what a career in sales could be. It challenged social norms by hiring female college students and housewives, turning retail into a respectable, modern profession.
Shinsegae began distancing itself from the Samsung Group in 1991, a separation that was finalized in 1997. Along the way, it launched Emart, Korea’s first discount retailer, in November 1993. As of 2023, Shinsegae ranked as the 11th largest conglomerate in Korea. And in October 2024, it was announced that the group would split its two flagship retail divisions — Shinsegae department stores and Emart supermarkets — as part of a broader succession plan by the founding family; not a bad idea, one might argue, given how messy the first transfer of power in the Samsung empire was.
Sources
Samsung Rising by Geoffrey Cain. Published in 2020.
https://time.com/archive/6890382/south-korea-b-c-lees-world/
https://english.hani.co.kr/arti/english_edition/e_business/529908.html
https://www.koreatimes.co.kr/www/nation/2024/11/113_129875.html