Samsung’s Boss Behind Bars — Fall of a Chaebol
Samsung is the world’s largest corporate enterprise headquartered in Samsung Town, Seoul, South Korea. Founded by Lee Byung-chul in 1939, the organization remains as the largest family-controlled group with businesses in textile, food-processing, technology, retail, electronic equipment, security and of course telecommunications. Imagine, the boss of such a large-scale corporation being convicted, arrested and now sentenced a five-year jail term on bribery and corruption charges. It is definitely a shock for the tech and business world to know that South Korean law has finally passed a judgment on the country’s most powerful chaebol to imprisonment.
A Little Bit of Chaebol Power History
In South Korea, a family-controlled company is called a chaebol and they are not just wealthy but hold immense powers; enough to manipulate and control a government. Ever since the end of the Korean War, local businessmen took hold of the country and promised to rebuild it using official relief funds as capital. This was achieved through sheer bribery and corruption which explains the government’s protection of chaebol families for decades. The deal with officials did not go to waste as within a few decades, South Korea rose to become the world’s headquarters for companies like LG, Hyundai, Samsung, Lotte which not only changed the social landscape but also literally pulled the country out of poverty. Family members of chaebol companies spread out to create more industries and businesses thus monopolizing the entire market as well as the wealth that it generates. Chaebols are essentially invincible, therefore the arrest of Lee Jae-young is anything but a simple case of corruption. It has ripple effects that can disturb the industry and the country as a whole.
The Arrest of Lee Jae-young
Lee Jae-young was accused of paying $36 million in bribes to President Park Geun-hye’s confidante Choi Soon-sil in return for the government’s support to merge two Samsung affiliates that could help Lee inherit corporate control from his father Lee Kun-hee, the chairman. Enough to say that the corruption caught up with him when the President herself was caught in a massive corruption case that led to her eventual downfall.
Samsung has been through a rough time for the past few years with the chairman being incapacitated since a heart attack in 2014, followed by the Note 7’s disastrous phone series (which was also Samsung’s most ambitious project) that was released under Mr. Lee’s leadership. It was hoped that Mr. Lee would pull the company through the crisis and perhaps lead them through tumultuous times, but he was sadly more interested in taking full control of the company from his father rather than lead the company.
Impact of the Imprisonment
South Korea’s economy runs on the shoulders of chaebol run businesses that are extremely important to the country’s progress. The Titans are instrumental in developing the national economy hence they have to be favored even by prime ministers and presidents. This means that entrepreneurs and start-ups in Korea or small to mid-sized businesses find it extremely difficult to thrive in a culture completely controlled by giants who allow no one else the space to grow and prosper. The arrest was welcomed by the youth and business class of Korea who see this as a positive sign that no one is above the law. That being said, many are still afraid that the arrest and the subsequent jail time could just be a show-off and that he could be acquitted anytime soon. This is simply because the family has had a history of bribery and tax evasion charges from the time of Mr. Lee’s father. However, since the company was important to the country’s economy and prosperity, he was always pardoned by the president and returned back to business as usual.
Nevertheless, the boss’s arrest has left Samsung leaderless and shy of investment. This is a blow to the company as well as to the country especially since Samsung Electronics alone accounts for 20% of the country’s exports. The irony is, it isn’t just Samsung. Hyundai, LG, and other similar companies wield immense power both in their country and in the business world. These companies are coming under scrutiny especially since the bosses leading them have had their fair share of bribery convictions. The point is, how far will the government go to make sure there is law and order in the world of white collar crimes? And if it does choose to take on white collar criminals, how does it impact the tech world at large?