This Economist issue looks at the Samsung‘s leadership saga. For decades there has been a love-hate relationship between the government and the family leadership of Korea‘s top business groups. Many have been investigated, charged, convicted, and then pardoned–several times.
All in the family Lee Kun-hee may return
Jan 28th 2010 | SEOUL | The Economist
JUSTICE in South Korea can be elastic. Industrialists who break the law have had their sentences commuted or been pardoned on the basis of their contributions to the national economy, sweeping them back to their corner offices. Lee Kun-hee, the patriarch of Samsung, appears to be on the same trajectory.
In early January Mr Lee appeared at a big American electronics show, a rare act for a notoriously private person. Upon his return to South Korea Mr Lee said he was “thinking about” returning to a formal role at Samsung, whose sales account for about a fifth of the country’s gross domestic product and which the Lee family controls through a convoluted web of shareholdings.
Mr Lee, who is 68, had resigned as Samsung’s chairman in April 2008 after being charged with breach of trust, tax evasion and securities violations. Convicted of the first two, he was ordered to pay 46 billion won ($40m) in taxes and 110 billion won in fines. A three-year prison sentence was suspended.
On December 31st South Korea’s president, Lee Myung-bak, pardoned Mr Lee, wiping his record clean. The president said the country needed his help to win its bid to host the 2018 Winter Olympics. Shareholder activist groups squawked over the pardon and were duly ignored.
Mr Lee’s possible re-ascension to the chairmanship throws a spotlight on Samsung’s corporate governance. Yet the leadership saga seems not to have hurt its performance. Last October Samsung Electronics posted record quarterly operating profits of 4.2 trillion won—better than any of Japan’s big electronics makers. It expects to report record sales for 2009 of 136 trillion won when it releases its earnings on January 29th. It is now the world’s largest maker of computer memory-chips and the second-biggest mobile-phone company after Nokia.
Last year a South Korean court declared that a sale of Samsung securities by Mr Lee to his children at below market prices was legal, clearing the way for the next generation to take control. In December his only son, Lee Jae-yong, was named chief operating officer of Samsung Electronics. He is regarded as the heir apparent. On February 12th Samsung will celebrate the birthday of its founder, Lee Byoung-chull. The family, after all, must be honoured.
Tags: Korea legal, Korean justice, Lee Kun-hee, Samsung, Samsung Electronics
Damned if you do, damned if you don’t.
While there may indeed be some truth to the economic “necessity” of having key business figures like Lee Kun-Hee at his desk, pardoning him for his crimes (for the second time, no less!) highlights the capricious nature of law enforcement and the impotence of the judiciary. Perhaps these factors balance out. There’s no dispute that Samsung is incredibly important to the Korean economy.
My real concern here is that the purported reasons for this pardon do not reflect that “necessity”. Lee, having already served on the Olympic committee for several years and failed to bring the games to Pyeongchang in the past, is unlikely to have an ace up his sleeve this time around. And I would guess that the Olympic committee will not look favorably on awarding the games to a nation that so readily pardons a repeat offender just so that it can get a “leg up” in the competition. That is not the spirit of fairness the Olympics strives to promote.
Another problem is that the pardon is based in part on recognition of past accomplishments. You can’t be necessary retroactively. Some hypothesize that the pardon came in exchange for KH Lee’s pledge to bring Samsung into the President’s Sejong City plan.
I believe ANY kind of economic or social problem in Korea can be traced to uneven enforcement of laws– whether by the policeman turning his head to drunkenness or speeding, judges making questionable rulings, legislators drafting ill-conceived laws in the heat of passion (or trashing the National Assembly in fits of passion), or Executive interference in settled matters.
I’m truly looking forward to the day this kind of special treatment is at an end.