hankyoreh

As part of reform measures, Samsung Group Chairman Lee Kun-hee said yesterday that he will step down as the head of the nation’s largest business conglomerate. It is quite saddening to some to see one of the nation’s most influential business leaders bowing to the public as he announces his resignation. For Samsung employees, meanwhile, it must come as a shock. Samsung seems to have put a lot of thought into the reform measures, which include closing the group’s powerful strategic planning office. The conglomerate must want the measures to be regarded as “sincere” moves by its leadership. However, by the general standards of law and justice, Samsung must face quite a different reality as it didn’t mention anything about the core corruption scandals and fell short of demonstrating a strong will to revamp its current emperor-style management practices. They just seem to be trying to cover up their past wrongs via the resignations of some of their key officials, while continuing the father-to-son transfer of power and making little effort to provide a vision for its management in the future.

The announced reform measures can be deemed meaningful only if the independent counsel’s investigation into a range of corruption allegations against Samsung has been carried out well. Our belief, unfortunately, is that the probe into the Samsung scandal turned up less would have been desirable on many of the allegations. The investigation was prompted by the former chief of Samsung’s legal affairs, Kim Yong-cheol, who claimed that the conglomerate sidestepped laws regulating the transfer of power from Lee Kun-hee to his only son Jae-yong, created trillions won of slush funds, and bribed government officials and others for business favors. With all of those clues, the special investigators, however, made compromises or overlooked some of the corruption allegations, while clearing Samsung of allegations that it stashed money under borrowed names. Though Chairman Lee said he will take legal and moral responsibility, all of this is why we cannot accept it as a “sincere apology.” Also, Samsung did not mention anything about the issuance of convertible bonds through Everland, a practice which the independent counsel regarded as illegal. Despite such wide-ranging reform measures, there is likely to be little change, with some criticizing that the measures are just intended to reinforce the father-to-son transfer without any losses. Still, we need to see if Chairman Lee will keep his promise to use the funds in the borrowed-name accounts, which many see as channels for tax evasion, for the “public good.”

Admittedly, Samsung must have faced a dilemma before coming up with its reform measures, as those who will spearhead them are no other than those who have been at the center of corruption allegations. It must also have considered a possible management vacuum given that Chairman Lee has been the figure running the group, along with the strategic planning office and heads of its affiliates. Still, this is the good starting point for Samsung to upgrade its management system.

In this context, the affiliates’ decision to push for independent management is welcome news. Samsung, however, did not clarify its stance on the intra-group investment issue, saying that group management shouldn’t be threatened. It is possible, then, for Samsung to accelerate the management handover to Jae-yong after some time. Even if the way the father-to-son management transfer was carried out was not illegal, it is morally unjustifiable.

All the problems lie within the emperor-style management structure, which lacks a process for rational decision-making. Samsung should fix the problem and step up the drive to enhance transparency. As Samsung said that yesterday was just the beginning of reforms, we hope that the business conglomerate will establish a creative and rational, forward-looking management system, living up to expectations for one of the world’s leading groups. It will surely take a series of sincere confessions to clear all lingering corruption allegations.

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