South Korea’s top conglomerate Samsung Group is likely to make an “irreversible” change after uncertainty over the fate of its de facto head is cleared, the head of the nation’s antitrust watchdog said Tuesday, referring to an upper court’s ruling on Samsung Electronics Vice Chairman Lee Jae-yong.

The Supreme Court has been reviewing Lee’s case since last month. It is expected to take up to about six months to hand down the final ruling on Lee, who was freed on a suspended sentence in February.

While highlighting Samsung’s efforts in making changes to its boardroom, such as bringing in foreign executives, Fair Trade Commission Chairman Kim Sang-jo said that the conglomerate may face challenges in cutting the link between its insurance and electronics arms. 

“Samsung should suggest the most rational direction to the market and the government should also agonize over the way to induce such change,” he said in a radio interview.

Two financial arms -- Samsung Life Insurance, and Samsung Fire and Marines -- hold a combined 10.3 percent share of the group’s crown jewel Samsung Electronics, exceeding the law that bans financial entities of chaebol from holding a more than 10 percent stake in a nonfinancial unit.

The Financial Services Commission said in a recent announcement that the regulator would tighten regulations targeting major conglomerates to sell off their shares in nonfinancial businesses and minimize cross-shareholding risks. 

In compliance with the reinforced financial regulations, Samsung Life Insurance and Samsung Fire & Marine Insurance, which have a significant share of the group’s core affiliate Samsung Electronics, will have to sell off their combined 0.3 percent share of Samsung Electronics stocks, which totals 1.3 trillion won ($1.2 billion) at the current market price.

With regards to the progress of “self-reform” efforts at chaebol that he had requested in June last year, Kim said he would meet again with the heads of conglomerates in early May for a discussion. 

When Kim was appointed to head the FTC in June last year, he met with leaders of four major conglomerates -- Samsung, Hyundai Motor, LG and SK -- and asked that they voluntarily change their corporate governance to become more transparent and democratic.

“By listening to difficulties that conglomerates have, the FTC will continue to work on measures to support conglomerates to have sustainable corporate governance,” Kim said, adding that such measures will be reflected in the revision to the fair trade law, expected to be proposed in the second half of this year.

By Kim Da-sol (ddd@heraldcorp.com)