Bid to arrest Samsung heir another blow to company
HONG KONG — Suave and mellow, Samsung’s heir apparent has often been portrayed as the right leader for a big but stodgy business empire looking to make its way in the age of innovation.
The leader, Lee Jaeyong — who goes by Jay Y. Lee in the West — is part of the third generation of the Lee family to lead the conglomerate, which makes products as varied as microchips and ships. While his father was seen as old-fashioned, Samsung has painted Lee as equally comfortable in Silicon Valley and in the boardroom, as a leader who could open up the clannish business even as he helped its flagship electronics arm take on Apple in innovation.
That image took a hit Monday, when prosecutors called for Lee’s arrest in the investigation into President Park Geun-hye of South Korea. Prosecutors contend that he bribed the president and one of her confidants in exchange for help transferring control of Samsung to him.
In a statement, Samsung denied any bribery or making “improper requests related to the merger of Samsung affiliates or the leadership transition.” But the move by prosecutors casts Lee in a different light, as a leader similar to his father — convicted of white-collar crimes but pardoned twice — and it could raise questions about Lee’s pledge to improve Samsung’s transparency and make it more responsive to shareholders.
“Beyond the arrest itself, this is going to be a big blow to the narrative they’ve been building,” said Geoffrey Cain, the author of a forthcoming book on Samsung. “It’s hard to convince shareholders and partners they are a hip Silicon Valley-style company when these charges show them to be a company run like a feudal dynasty.”
Lee’s legal troubles are unlikely to have an immediate impact on Samsung’s day-to-day business, as operations are run mainly by professional managers in autonomous teams, analysts said.
And his role at Samsung is not necessarily over. South Korea has a long history of pardoning the leaders of its largest family-run companies. With Samsung accounting for 20 percent of the country’s exports, past efforts to penalize the company or its executives have been met with worries about the impact on South Korea’s economy.
But Lee’s problems could influence the company’s strategic decisions at a time of major challenges, such as how to bounce back from the debacle over its Galaxy Note 7, a smartphone intended to challenge Apple’s position as the world’s most innovative phone maker. A spate of fires last year forced Samsung to recall and then cease production of the phone, tarnishing the company’s name and making it the object of airline safety announcements and jokes on U.S. talk shows.
Lee, 48, is vice chairman of Samsung, but he has been widely considered the company’s de facto leader since his father, Lee Kun-hee, had a heart attack in 2014.