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Explained: Why Samsung scion had to apologise, and what this means for the global conglomerate

Some observers say Lee’s statements that were delivered at Samsung’s headquarters in Seoul, were a result of consistent pressure that the Samsung heir has been under, particularly since March, following years of corruption and criticism.

Written by Neha Banka , Edited by Explained Desk | Kolkata | Updated: May 8, 2020 2:23:13 pm
Samsung, Samsung owner, Samsung Lee Jae-Young, Lee Jae-Young Samsung, Lee Jae-Young apology, Express Explained, Indian Express This has been Lee’s first public statement in five years. (AP)

Lee Jae-young, the 51-year-old Samsung Electronics vice-chairman and heir to one of South Korea’s biggest conglomerates, issued a rare apology on May 6 over the company’s controversial succession plans. Some observers say Lee’s statements that were delivered at Samsung’s headquarters in Seoul, were a result of consistent pressure that the Samsung heir has been under, particularly since March, following years of corruption and criticism.

What was addressed at Samsung’s conference?

For years, Samsung’s executives have been accused of corruption, with some having been investigated, while others have been convicted. This has been Lee’s first public statement in five years. In February 2017, Lee was arrested and later charged over his alleged role in a political and corporate corruption scandal in which South Korea’s former president, Park Geun-hye was also said to have been involved. Lee had been accused of bribery, embezzlement, perjury and of owning undeclared assets overseas.

In 2016, Samsung under Lee’s leadership was accused of paying $37.7 million to two non-profit foundations run by Choi Soon-sil, a friend of Park Geun-hye, in exchange for political support that would ensure Lee’s rise to the head of Samsung. Without support from the government-run South Korean national pension fund, this would have been a challenge for Lee.

This is where Samsung’s succession plans come into play. Back then, Lee had denied the charges but admitted to making donations to the non-profit foundations, claiming that Samsung had not asked for favours in return. In August 2017, Lee was convicted of the charges by a South Korean court and was sentenced to prison for five years. In February 2018, however, that sentence was reduced by the Seoul High Court, which decided to suspend the jail term, allowing him to walk free.

Samsung’s identity as one of South Korea’s most well-known multinational, family-run conglomerates and the wide-scale corruption in which it was reportedly involved, earned public criticism and anger across the country, along with calls for accountability. Last August, South Korea’s Supreme Court overturned an appeals court ruling in Lee’s case that may lead to a stricter sentence for Jee, including the possibility of a return to jail.

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At Wednesday’s press conference, Lee, the company’s de facto head, addressed some of the controversies, promising “there will be no more controversy regarding succession”. He said: “I do not plan to pass down my role to my children. This is something I have thought about for a long time but have been hesitant to express it openly… There will absolutely be no infringement against the law… There will be no leaning on legal expediency or actions that cause ethical reproach. My sole focus will be on enhancing the corporate value of Samsung.”

What does this mean for succession at Samsung?

Following Lee’s sentencing, he had to give up on an extension of his three-year term on the board of Samsung, although he has retained his title as vice-chairman of the company. According to news reports in South Korea, Samsung’s board is now responsible for management decisions.

Although Lee stated in the press conference that he has no plans for passing his role to his children, observers in South Korea say there was no real clarity in the statement concerning the role of the Lee family. Observers said Lee’s statements did not say whether this would mean that the Lee family would slowly cease ownership over the company, whether in part or fully. Several members of the Lee family who own Samsung head other subsidiaries of the parent company. Lee Jae-young, who usually stays away from the media, has one son aged 23 and one daughter aged 16, but not much is publicly known about them. Observers believe that Lee’s statements mean little if there is no implementation.

Why does Samsung’s leadership matter to South Korea?

Although the Samsung group’s flagship company is Samsung Electronics, the world’s biggest smartphone company, it also has 59 other affiliated companies with interests ranging from technology to fashion, including interests in insurance, shipbuilding, hotels and theme parks. The 82-year-old company was first started in 1938 by Lee Byung-chul and over the decades became one of South Korea’s biggest and most powerful family-run conglomerates, with operations around the world. According to a 2018 report by the BCC, Samsung has sales equivalent to about a fifth of South Korea’s GDP.

While Lee’s legal troubles did not severely impact the company, any drastic changes like those proposed by Lee in his press-conference may reflect on the market.

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