President and chief executive officer, Samsung Corporation
Born: February 18, 1943.
Education: Seoul National University, BA, 1965.
Family: Married; children: four.
Career: Bank of Korea, 1969–1976, junior economist in research department; 1973–1975, assistant advisor on economic policy in the office of the president; Samsung Corporation, 1976–1983, manager, planning department; Samsung Pacific International, 1983, president; Samsung America, 1983–1987, president; Samsung Electronics, 1988–1990, senior executive managing director, sales and marketing, semiconductor division; Samsung Group, 1991–1993, vice president, chairman's office; Joong-ang Daily News, 1994–1998, executive vice president; Cheil Communications, 1998–2001, president and chief executive officer; Samsung Corporation, 2001–, president and chief executive officer.
Address: Samsung Corporation, Samsung Plaza, 263 Seohyeon-dong, Bundang-gu Songnam, Kyonggi 463-721, South Korea; http://www.samsung.com.
■ Pae Chong-yeul was president and CEO of the advertising and media agency Cheil Communications before being appointed in 2001 to the same positions at the Korean conglomerate Samsung, then under the chairmanship of Lee Kun-hee. Samsung was established in 1938 and immediately targeted the global electronics market. In 1975 the Korean government designated it the country's first General Trading Company (GTC), a title that designates an officially recognized import and export trading company. By 2002 the Samsung industrial group employed 175,000 people worldwide and posted revenues of $116.8 billion.
A major transition took place in 1996 when Samsung Corporation merged with Samsung Engineering and Construction. Following the merger Samsung added retail to its existing business portfolio of trading and apparel products, and a joint venture with Tesco of Great Britain saw it consolidate its three major business groups in trading, construction, and housing development. Samsung built the 92-story KLCC Petronas Tower complex in Malaysia, then the world's tallest buildings, and was the top maker in the world of dynamic random-access memory (DRAM) and other memory chips. Its venture into information technology endowed it with Korea's largest online shopping mall and industry-specific global e-markets for the export of industrial goods and commodities. Two of its original e-markets were in chemicals and seafood products.
Pae's graduation from Samsung's in-house advertising company Cheil Communications to Samsung Corporation's president and CEO may be interpreted as a shift in the Samsung Group's global strategy. After a period of expansive growth in the 1990s, Samsung moved to consolidate its gains after 2001 by selling off unproductive assets and cutting costs while emphasizing developmental work in media and marketing. A focus on emerging markets, notably in Brazil, Russia, India, and China, was accompanied by Cheil Communication's steady acquisition of Samsung accounts in those countries. In 2004, for example, Samsung's advertising budget in India alone was some 1 billion rupees, making Cheil an obvious choice as Samsung's advertising agency. The shift in emphasis toward marketing thus created a stable client-partner relationship between Cheil and its parent company Samsung.
Pae cut his executive teeth at Cheil Communications, which was established in 1973. Under Pae's direction Cheil Communications was transformed into one of Korea's largest advertising agencies, with over 856 employees and a market capitalization of more than 5 billion won. The company expanded into the international market and had branches in London, Barcelona, Beijing, Frankfurt, Hong Kong, Moscow, Tokyo, and Vienna, and two branches in Korea, at Seoul and Pusan. Its American partner, Cheil Communications America, was headquartered in New York and had branches in Miami and Los Angeles. Another partner, Cheil Bozell, based in Korea, was a joint venture with Bozell USA. When Pae assumed control in 1998, the company billed 686.1 billion won.
The business philosophy that Pae set for Cheil was simple and direct: number one in strategy and number one in creativity. Its strategy focused on three main business sectors: television and radio, which accounted for 40.4 percent of total business activity, promotion (25.3 percent), and print media (23.7 percent). Other activities accounted for the remaining 10.6 percent.
An idea of the diversity of Cheil's market share under Pae can be gained from its client list, which included Ace Bed Company, Dae Woong Pharmaceutical Company, Dongsuh Foods Corporation, Hanil Synthetic Fiber Company, Hotel Shilla, Korea Mobile Telecom, Lamy Cosmetics Company, Koreana Cosmetics Company, Pigeon Corporation; Pizza Hut Korea Company, Pulmuwon Foods Company, Samsung Aerospace Industries, Samsung Corporation; Samsung Life Insurance Company, Samsung Engineering & Construction Company, Samsung Electronics Company, and Sun Kyung Business Group.
Pae expanded Cheil's client list when it merged with the American advertising giant FCB. FCB Worldwide was the largest advertising agency in the United States and the fifthlargest agency worldwide, with 1999 billings of $8.8 billion. With more than 200 offices servicing clients in 96 countries, FCB Worldwide's client roster included S. C. Johnson, DaimlerChrysler, Compaq, AT&T, Dockers, Quaker Oats, U.S. Postal Service, Coors, and Beiersdorf. Pae Chong-yeul was personally credited with raising Cheil Communications stock value eight-fold. In 2004 Cheil had become the 18thlargest marketing agency in the world, with $182 million in revenues.
In 1993 Samsung's chairman Lee Kun-hee launched his New Management Initiative, whose key element was ethics. Lee stipulated that a business that lacked a sense of ethics could not make good products. The guiding principles laid down by Lee emphasized the "three virtues" of humanity, ethics, and good manners.
Referred to as "chairman and chief ethics officer" by the group's key members, Lee stated the Samsung philosophy as follows: "Profit for profit's sake does not make sense…. In the new century, businesses must sell their philosophy and culture in addition to products" Korea Herald , September 16, 2003). Pae summarized the chairman's position by noting that Lee firmly believed that good-quality management and products could be expected from good-quality people.
If Lee set the moral tone for his affiliates and employees, he has also set the cultural tenor at Samsung. His personal style was as simple as his philosophy: "Stick to business." His belief in the virtues of corporate discipline can be seen in a comment he made to his counterpart at Daewoo, Kim Woo-choong, then contemplating a bid to run in the upcoming Korean Presidential election: "Why don't you withdraw that bid?" A majorrift between the two companies ensued. Pae, who was then vice president of the chairman's office at Samsung, apologized on behalf of Lee and explained that the chairman only meant that a businessman should remain a businessman ( Korea Herald , July 24, 2003).
The chairman's remark also marred Samsung's good relations with the government, which had used the group to educate its secretarial staff under the New Management Initiative. Ranking bureaucrats, including Interior Minister Choi Hyung-woo and provincial governors, also underwent educational courses provided by Samsung's Human Resource Development Center. The government took offense at the chairman's implied criticism of politicians and bureaucrats. Relations soured and the government put Samsung under considerable pressure, including investigations concerning alleged real-estate speculation.
At this trying time, Pae expressed Samsung's position that businessmen and politicians needed to cooperate for the good of the country and, on behalf of Chairman Lee, stressed the need for a unified effort by the people, the government, and businesses to build national competitiveness. The controversy eventually died down.
Lee's management philosophy was said to have been in spired by golf and other sports. He believed that golf teaches self-discipline, obedience to rules, and gentlemanly behavior; baseball teaches one how to be a star player and a team player; and rugby teaches the spirit of fortitude. Pae interpreted Lee's remarks about the proper way to swing a golf club as meaning that an organization must be flexible and agile if it is going to succeed. In response to his employee's sluggish response to his call for innovation, Lee imposed a 7 a.m. to 4 p.m. workday. Although the group's actual business started at 8:30, the hour and a half between 7:00 and 8:30 was designed to make employees feel the need for drastic change through a break in routine. This shock was an attempt to awaken employees from their lethargy. The move met with some controversy, and some employees did not understand the reason for changing the workday. Pae explained the new system had several intentions: it allowed Samsung employees to reduce the time for commuting, which in turn was expected to increase efficiency, and—because the workday was now ending earlier than in the past—it allowed employees to study after work and spend time with their families.
Perhaps nobody affiliated with Samsung better embodied Lee's corporate philosophy and personal style than Pae. At Cheil, Pae was already concerned about public relations and the company's role in community affairs. For example, he organized a benefit concert with Michael Jackson in 1995 on be half of the World Peace Forum for Children in response to the famine in North Korea. Lee himself repeatedly stated that a company must be held responsible to its community and must participate in charity functions and benefits.
As a spokesman and representative for Chairman Lee and Samsung, Pae helped to redefine the Samsung image while introducing products to the marketplace. The emphasis on employee self-improvement, good community relations, and corporate transparency played a role in supporting the creation of a management system that could garner large annual profits even under unfavorable business conditions. In 2004, three years after Pae became president and CEO, Samsung surpassed Hyundai to become Korea's largest corporate group.
See also entries on Samsung Electronics and Samsung Group in International Directory of Company Histories .
Kim Sung-hong and Woo In-ho, "Going to Work at 7: Wake Up Call for Sleeping Samsung; 7-to-4 Workday Scheme Marks Starting Point of Lee's Bold Reform for His Business Empire," Herald Business , June 5, 2003.
——, "Korea Should Change as well as Samsung," Korea Herald , July 24, 2003.
"Learning Management on Green," Korea Herald , June 19, 2003.
"Lee's Principle: 'Politics Is Not My Cup of Tea,'" Korea Herald , July 24, 2003.
"Samsung Puts Corporate Ethics First," Korea Herald , September 16, 2003.
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