It had long been obvious that the hard-pressed financial companies suffering from a continued fall in profits would drastically downsize at some point, and it was Samsung Group that triggered the restructuring tide in the financial sector.
A rumor has been circulating that the nation’s top conglomerate is trying to slim down its financial sectors for the sake of heir apparent Lee Jay-yong, who is expected to take over the group’s financial affiliates, as well as the lucrative electronics business.
However, industry watchers said the worsening financial heath of its financial arms due to the continued fall in profits could be the main reason for the group’s move toward restructuring.
|An employee of Samsung Securities, which announced a massive downsizing plan last Friday, walks past the company’s logo at its headquarters in Seoul. (Bloomberg)|
Samsung Life Insurance, the country’s largest insurer, and Samsung Securities announced a management shake-up last week, both pledging to cut down their organization by 20 percent or more.
Kim Chang-soo, CEO of Samsung Life Insurance, said that the company would reduce the number of board members from 70 to 55 and that of its headquarters from five to four.
Following the move, Samsung Securities CEO Kim Suk announced a similar plan on Friday to reduce the size of the executive board from 30 to 24 and encourage senior employees to file for voluntary early retirement.
Up to 500 employees are expected to retire, meaning the company’s workforce would be cut down by one-fifth.
This is considered a last resort as the securities company already transferred some 100 employees to Samsung Life Insurance last year.
“We will be faced with an unprecedented crisis, unless we make (this) inevitable choice and propel management efficiency,” the CEO said, pledging to implement an extreme cost-saving plan.
Also, from 2016, employees aged 55 or above will be subject to the peak wage system and receive an annual 10 percent wage cut, according to officials.
The extensive restructuring gestures of Samsung’s financial affiliates have long been in the works, especially since chairman Lee Kun-hee sent out a stern warning in 2010 about their low profitability and lax management.
He also has demoted a number of financial chiefs and replaced them with Samsung Electronics figures, signaling that the financial sector would be downsized.
Industry watchers expected Samsung’s move to create ripple effects in the securities and insurance industries.
The second-largest insurer, Hanwha Life Insurance, is to receive voluntary retirement applications from next week, aiming to reduce the number of high-salaried senior employees, according to officials.
The chief financial regulator clarified that policymakers will sell Woori Investment & Securities with two other units of the state-funded Woori Financial Group.
“I believe a batch sale is appropriate. The final decision will be made at a board of directors’ meeting at Woori Financial Group,” Financial Services Commission chairman Shin Je-yoon told reporters on Monday.
When NongHyup Financial Group acquires Woori Investment & Securities as planned, it may have no choice but to launch a massive restructuring plan to cut overlapping jobs and branches, industry sources said.
By Bae Hyun-jung (firstname.lastname@example.org)