hankyoreh

The Federation of Korean Industries building in Seoul’s Yeouido neighborhood

Samsung Electronics and other Samsung Group affiliates withdrew from the Federation of Korean Industries (FKI) on Feb. 6.

The exodus by its “majority shareholder” Samsung, combined with Hankyoreh reports on the direct payment of some 2.5 billion won (US$2.2 million) to conservative and far-right groups at the Blue House’s request, now appears to be threatening the very foundations of FKI’s survival.

Samsung Electronics announced on Feb. 6 that it had submitted a request to withdraw from FKI.

“Companies involved with Samsung Electronics will also be making their own decisions and submitting their own withdrawal requests soon,” said a Samsung Group source.

Samsung Electronics, where Vice Chairman Lee Jae-yong is an internal director, was the first of the Samsung Group companies to submit a withdrawal request. Other affiliates, including Samsung SDI and Samsung Electro-Mechanics, plan to submit their own shortly.

While Lee promised to withdraw during a hearing last December on the Choi Sun-sil government interference scandal, the group’s decision to go ahead with it is likely to have major repercussions. Not only was FKI founded under the leadership of Samsung Group founder Lee Byung-chull during the Park Chung-hee presidency in 1961, but Samsung also accounts for around one-quarter of FKI‘s total membership dues. It’s a major blow in both symbolic and financial terms.

With Samsung’s departure now official, other companies that had been observing its trends now appear likely to follow suit. Among South Korea’s top four chaebol, the LG Group departed in late December, while the SK Group announced that it was halting payment of membership dues and refraining from all FKI activities. With its executive appointments finishing up on Feb. 6, the Hyundai Motor Group now looks likely to establish its own position shortly. Together, the four groups paid 37.8 billion won (US$33.2 million) of FKI‘s 49.2 billion won (US$43.2 million) in total annual dues for 2015, or around 77%.

A source with the fifth-ranked Lotte Group said it had “not discussed withdrawing,” but added that it would “discuss the topic [of withdrawing] again if [FKI’s] representativeness as an organization is weakened by the withdrawal of major companies.”

A source with KT, which announced plans to withdraw late last year, said, “FKI is clinging to all of the places that have submitted withdrawal requests by refusing to do the administrative processing, but it doesn’t appear to hold much meaning.”

The Korea Electric Power Corporation and other public companies also began withdrawal procedures last year.

FKI is also having difficulties finding a new chairperson. Chairman Huh Chang-soo and Vice Chairman Lee Seung-chul announced plans to step down at a regular general meeting scheduled for this month amid revelations of direct involvement in the payment of 77.4 billion won (US$67.9 million) from chaebol to the Mir and K-Sports Foundations, run by Choi Sun-sil.

By Lee Wan, staff reporter

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