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South Korean President Moon Jae-in shakes hands with Samsung Electronics Vice Chairman Lee Jae-yong at a production plant in Hwaseong

Samsung has been unable to extricate itself from a mire of scandal surrounding illegal and corrupt activities. Beginning in October 2016 with an incident involving bribes to government influence-peddlers, the situation has escalated with revelations of accounting fraud by Samsung BioLogics and the destruction of evidence over the course of a union-busting incident.

To make matters worse, the semiconductor boost that previously propelled Samsung to record earnings has dropped off dramatically. Previously riding high on confidence, Samsung has taken on a different tone.

“We really could go bust at this rate,” lamented one Samsung Electronics executive. “Nokia’s collapse happened in an instant.”

Morale is at rock bottom. The president of a Samsung Electronics affiliate was at a loss for words after revelations that a company server had been hidden under the floor of a Samsung BioLogics factory.

“We used to pride ourselves as part of the global top tier. How did we come to this?” the company president said.

Many are arguing that Samsung brought the crisis on itself. Common sense dictates that companies facing major scandals involving illegal and corrupt activities should hurry to institute measures to prevent them from affecting business. Samsung apologized to the South Korean public twice in the past following the Agency for National Security Planning “X-file” incident in 2006 and slush fund allegations in 2008. In the latter case, it also made a surprise announcement of reforms including the en masse resignations of Chairman Lee Kun-hee and other leaders and the dismantling of its “control tower.”

But over the past three years, Samsung has declined to acknowledge responsibility despite actions that have come as major shocks to the public. Indeed, Samsung Electronics Vice Chairman Lee Jae-yong asserted in the final statement in his bribery case that he had “never asked any favors of the President [Park Geun-hye] for my own personal interests.”

Why has Samsung chosen this approach? At the heart of the Samsung scandals is the issue of Lee’s hereditary succession of management authority. While the second court in the Samsung bribery case differed from the first in rejecting claims that the management authority issue was a motivating factor, the truth of the succession effort has been coming to light over the course of the accounting fraud and evidence destruction investigation. But with Lee denying the allegations, his professional managers are unlikely to risk incurring the leader’s wrath by proposing an apology to the public.

The key to fixing the situation ultimately lies in Lee’s hands. It’s time for him to find a way to save Samsung – which has been facing a mounting sense of crisis amid the different internal and external challenges – rather than saving his own skin. A first step in that direction would be to put up a firewall of sorts to prevent his own issues from affecting Samsung. The group has already suffered major damages. Samsung Electronics now has a golden opportunity, with President Moon Jae-in personally visiting one of its factories on Apr. 30 to announce his intent to support non-memory semiconductors. Since then, the matter has been overshadowed by questions about the appropriateness of the president meeting with Lee while the latter awaits a Supreme Court ruling. Recently, any mention of “investment” or “hiring” by Samsung is interpreted as a strategic move on Lee’s behalf.

If Lee can’t avoid a Supreme Court sentence, Samsung should also consider frankly stating a position beforehand on matters including the management succession.

“Lee Kun-hee would not have stood idly by like this,” lamented an executive at one affiliate.

“I don’t think the public would turn their backs if [Lee] apologized to the people, adopted a responsible stance, and signaled that he was working for Samsung’s future,” the executive added.

The chairperson of one mid-ranked group said Lee “should have anticipated from the start that he would be going [to prison] for a few years.”

Fundamentally, the Samsung governance structure and management system will need to be reexamined. After Lee Kun-hee was sidelined with health issues in 2014, many looked forward to a “new era” for Samsung, with Lee Jae-yong distinguishing his era from his father’s as the new leader in all areas of management, governance structure, and social responsibility. The disappointment has been profound. A former director of the Samsung restructuring headquarters said, “In early 1993, five years after he became the new chairman in late 1987, Lee Kun-hee presented a vision for new management, and he continued posing questions afterwards that helped turn Samsung into a global business.”

“In contrast, Lee Jae-yong hasn’t really come out with anything over the past five years,” the former official said.

As chaebols enter the phase of third- and fourth-generation leadership, they find themselves having to leave behind their exclusively owner-centered management approaches in favor of a more diverse governance structure and management system.

“It’s fine if Lee Jae-yong does a good job at management, but that might not be the case,” said Inha University professor Kim Jin-bang.

“A good approach would be for him to leave the management to professional managers and focus on playing an oversight role as majority shareholder,” Kim suggested.

June 7 happened to mark the 26th anniversary of Lee Kun-hee’s 1993 “new management” declaration, where he called for “changing everything but the wife and kids.” Now Lee Jae-yong needs to ask himself what he will have to change for Samsung’s sake.

By Kwack Jung-soo, business correspondent

Please direct comments or questions to [english@hani.co.kr]