Samsung vFINAL DR 7/5/08 16:10 Page 10
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10 BUSINESS NEWS Intellectual Property
Not to be reproduced without permission of the publisher EuroAsia Semiconductor
Samsung’s
chairman to resign
After 20 years at the helm of Samsung, the most powerful man
resigns after indictment for tax evasion and breach of trust.
A t a press conference called to
announce reforms for the
Samsung group, Mr. Lee Kun-
Hee, South Korea’s most powerful businessman,
announced he is stepping down after 20 years
leading the Samsung group. Samsung accounted
for at least 20% of South Korea’s export last year.
“Today, I have decided to step down from the
Samsung group chairmanship,” Lee, 66, told the
nationally televised event. “I express my deepest
apologies for causing great concern to the public
as a result of the special probe.”
Mr. Lee was charged after a three month
investigation into corruption allegations. He was
cleared of bribery and remains free pending trial.
His resignation is effective immediately. Four other
Samsung executives are to resign at the end of
June, including vice chairman Lee Hak-Soo.
The company mentioned it plans to dismantle its
strategic planning office, a team of approximately
90 officials. It is alleged this team helped the
chairman to manage his hidden assets and
presumed transfer control of management to his
son Lee Jae-Yong.
Mr. Lee Jae-Yong would quit his role as a chief
customer officer into in ‘tough environment’ such
as operations in emerging markets.
“We want to deliver a message to shareholders
that Samsung will enhance corporate transparency
and step up efforts to protect their interests,” vice
chairman Lee Hak-Soo told reporters after reading
the statement.
He said chairman Lee believes his son is not
ready yet to take control of the group.
Asked if the chairman would still try to pull
strings behind the scenes, the vice chairman said:
“He means it. He will not involve himself in the
day to day management.”
James Chung, Samsung Electronics’ spokesman,
said the shock resignation “will ensure enormous
changes to our group. This is just a start. Samsung
will be reborn as a global world class entity.”
It may look as if Samsung appear a little shell
www.euroasiasemiconductor.com May 2008
shocked after the announcements of resignations.
The group has about 59 affiliates and it may be
that there can be an awful lot of after effects
following the chaiman’s decision. However, the post
of chairman would remain vacant while affiliates
would be given more decision making power
spokesmen said.
Nine other Samsung executives have been
indicted after an independent probe, authorised by
the South Korean parliament, investigated
allegations by the company’s former chief lawyer.
The investigators claim to have found 4.5 trillion
Won (4.6 billion US Dollars) of hidden assets in
bank and stock accounts under the executive
names. The investigators believe Lee had evaded
taxes worth 112.8 billion Won.
Proof of funds to bribe government officials has
not been found although the former chief lawyer
had claimed bribery. Samsung said 4.5 trillion
Won had been transferred to Lee Kun-Hee’s real
accounts for good causes.
If found guilty, the chairman could face up to
five years imprisonment although there are not
many people who think he will be punished that
heavily. He asked the Korean public to support
Samsung to grow it into a first class world
business. Something he had pledged some 20 years
ago and he says: “I’m really sorry for not living up
to the promise.”
The claim of the special prosecutors mentions
‘many structural problems’, unclear transfer of
managerial rights, lack of transparent book
keeping and direct control over subsidiaries
through a planning agency without or very little
legal ground.
Samsung started in 1938 as a small trading
company. Group wide assets are now valued at
280.8 billion US Dollars and its exports were
worth 70 billion US Dollars last year. The very
complex management structure of South Korea’s
conglomerates often allows founding families to
control the group through cross shareholdings, even
if only holding a relatively small stake.