The ownership restructuring plans of the South Korean electronics giant Samsung Electronics could get delayed because of a court sentenced passed against the vice chairman of the company Jay Y. Lee for a jail term of two and a half years on Monday. The patriarch of the company and Lee’s father had passed away in October last year.
According to analysts, the strict verdict by the court also marks a change in the view point of South Korea about the wrongdoings of the owners of the powerful conglomerates, or chaebol, of the country even though such conglomerates have been responsible for the economic development of the country following the Korean War. It has been argued that such owners made their fortunes with establishing cozy relations with the country’s politicians.
Earlier, Lee had served one year in prison over charges of bribing an associate of former President Park Geun-hye. The 52 year old Lee is considered to be the most powerful businessman of South Korea and his previous prison sentence was suspended by an appeals court suspended in 2018. However in 2019, the Supreme Court of the country ordered a retrial of the case and the time of the current prison sentence will be counted against this latest court verdict.
Lee has seven days to appeal against the order of the Seoul High Court at the Supreme Court but according to analysts, it is likely that the Supreme Court will not change its legal interpretation on the case since it has already ruled on it once against Lee.
Charges against Lee of bribery, embezzlement and concealment of criminal proceeds worth about 8.6 billion won ($7.8 million) were found to be true by the Seoul High Court which said that the independent compliance committee that was set up last year by Samsung has not yet become fully effective.
“(Lee) has shown willingness for management with newly strengthened compliance, as he has vowed to create a transparent company,” said Presiding Judge Jeong Jun-yeong. “Despite some shortcomings... I hope that over time, it will be evaluated as a milestone in the history of Korean companies as a beginning for compliance and ethics,” he said.
He wants to “make a new Samsung”, Lee had said during his final statement to the court in December last year.
“This case involves the former president’s abuse of power violating corporate freedom and property rights... The court’s decision is regrettable,” Lee’s lawyer, Lee In-jae, told reporters.
All major market related decisions that would be taken at Samsung Electronics will not include Lee for the time being and he would also be barred from directly overseeing the process of inheritance from his father which is considered crucial for the family to retain control over the company.
While agreeing that the prison sentence against Lee would not impact the day to day functions of the company, analysts believe that there can be an impact on the large and long term decisions such as M&As and major personnel changes, whose effect is visible in the long term.
“(Lee’s) absence is not going to disrupt Samsung’s current management... Unlike in his father’s time, Samsung has been managing by system, decision-making distributed to each business’ CEO,” said Chung Sun-sup, chief executive of research firm Chaebul.com.
“But besides the hit to his global image, long-term strategies, like currently unplanned investment for the future and restructuring, may stop,” he added.
(Source:www.reuters.com)
According to analysts, the strict verdict by the court also marks a change in the view point of South Korea about the wrongdoings of the owners of the powerful conglomerates, or chaebol, of the country even though such conglomerates have been responsible for the economic development of the country following the Korean War. It has been argued that such owners made their fortunes with establishing cozy relations with the country’s politicians.
Earlier, Lee had served one year in prison over charges of bribing an associate of former President Park Geun-hye. The 52 year old Lee is considered to be the most powerful businessman of South Korea and his previous prison sentence was suspended by an appeals court suspended in 2018. However in 2019, the Supreme Court of the country ordered a retrial of the case and the time of the current prison sentence will be counted against this latest court verdict.
Lee has seven days to appeal against the order of the Seoul High Court at the Supreme Court but according to analysts, it is likely that the Supreme Court will not change its legal interpretation on the case since it has already ruled on it once against Lee.
Charges against Lee of bribery, embezzlement and concealment of criminal proceeds worth about 8.6 billion won ($7.8 million) were found to be true by the Seoul High Court which said that the independent compliance committee that was set up last year by Samsung has not yet become fully effective.
“(Lee) has shown willingness for management with newly strengthened compliance, as he has vowed to create a transparent company,” said Presiding Judge Jeong Jun-yeong. “Despite some shortcomings... I hope that over time, it will be evaluated as a milestone in the history of Korean companies as a beginning for compliance and ethics,” he said.
He wants to “make a new Samsung”, Lee had said during his final statement to the court in December last year.
“This case involves the former president’s abuse of power violating corporate freedom and property rights... The court’s decision is regrettable,” Lee’s lawyer, Lee In-jae, told reporters.
All major market related decisions that would be taken at Samsung Electronics will not include Lee for the time being and he would also be barred from directly overseeing the process of inheritance from his father which is considered crucial for the family to retain control over the company.
While agreeing that the prison sentence against Lee would not impact the day to day functions of the company, analysts believe that there can be an impact on the large and long term decisions such as M&As and major personnel changes, whose effect is visible in the long term.
“(Lee’s) absence is not going to disrupt Samsung’s current management... Unlike in his father’s time, Samsung has been managing by system, decision-making distributed to each business’ CEO,” said Chung Sun-sup, chief executive of research firm Chaebul.com.
“But besides the hit to his global image, long-term strategies, like currently unplanned investment for the future and restructuring, may stop,” he added.
(Source:www.reuters.com)
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