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Samsung’s chairman to resign
After 20 years at the helm of Samsung, the most powerful man resigns after indictment for tax evasion and breach of trust.
After 20 years at the helm of Samsung, the most powerful man resigns after indictment for tax evasion and breach of trust.
At a press conference called to announce reforms for the Samsung group, Mr. Lee Kun-Hee, South Korea’s most powerful businessman, announced he is stepping down after 20 years leading the Samsung group. Samsung accounted for at least 20% of South Korea’s export last year.
“Today, I have decided to step down from the Samsung group chairmanship,” Lee, 66, told the nationally televised event. “I express my deepest apologies for causing great concern to the public as a result of the special probe.”
Mr. Lee was charged after a three month investigation into corruption allegations. He was cleared of bribery and remains free pending trial. His resignation is effective immediately. Four other Samsung executives are to resign at the end of June, including vice chairman Lee Hak-Soo.
The company mentioned it plans to dismantle its strategic planning office, a team of approximately 90 officials. It is alleged this team helped the chairman to manage his hidden assets and presumed transfer control of management to his son Lee Jae-Yong.
Mr. Lee Jae-Yong would quit his role as a chief customer officer into in ‘tough environment’ such as operations in emerging markets.
“We want to deliver a message to shareholders that Samsung will enhance corporate transparency and step up efforts to protect their interests,” vice chairman Lee Hak-Soo told reporters after reading the statement.
He said chairman Lee believes his son is not ready yet to take control of the group.
Asked if the chairman would still try to pull strings behind the scenes, the vice chairman said:
“He means it. He will not involve himself in the day to day management.”
James Chung, Samsung Electronics’ spokesman, said the shock resignation “will ensure enormous changes to our group. This is just a start. Samsung will be reborn as a global world class entity.”
It may look as if Samsung appear a little shell shocked after the announcements of resignations. The group has about 59 affiliates and it may be that there can be an awful lot of after effects following the chaiman’s decision. However, the post of chairman would remain vacant while affiliates would be given more decision making power spokesmen said.
Nine other Samsung executives have been indicted after an independent probe, authorised by the South Korean parliament, investigated allegations by the company’s former chief lawyer. The investigators claim to have found 4.5 trillion Won (4.6 billion US Dollars) of hidden assets in bank and stock accounts under the executive names. The investigators believe Lee had evaded taxes worth 112.8 billion Won.
Proof of funds to bribe government officials has not been found although the former chief lawyer had claimed bribery. Samsung said 4.5 trillion Won had been transferred to Lee Kun-Hee’s real accounts for good causes.
If found guilty, the chairman could face up to five years imprisonment although there are not many people who think he will be punished that heavily. He asked the Korean public to support Samsung to grow it into a first class world business. Something he had pledged some 20 years ago and he says: “I’m really sorry for not living up to the promise.”
The claim of the special prosecutors mentions ‘many structural problems’, unclear transfer of managerial rights, lack of transparent book keeping and direct control over subsidiaries through a planning agency without or very little legal ground.
Samsung started in 1938 as a small trading company. Group wide assets are now valued at 280.8 billion US Dollars and its exports were worth 70 billion US Dollars last year. The very complex management structure of South Korea’s conglomerates often allows founding families to control the group through cross shareholdings, even if only holding a relatively small stake.
