Samsung chief acquitted
More efforts needed to enhance transparency, fairness
Samsung Electronics and other Samsung affiliates are widely anticipated to resume full-scale business activities, prompted by the recent court acquittal of Samsung Executive Chairman Lee Jae-yong of all charges related to accounting fraud and other allegations in the 2015 merger of two affiliates. “The long-protracted judiciary risk involving Chairman Lee has begun to mitigate,” Kim Dong-won, a researcher at KB Securities, said in a report released on Tuesday.
Kim said Samsung will be able to make quick decisions on major projects, such as mergers and acquisitions, shareholder policies and new investments. “Thus far, Samsung has faced a decline in group brand value, primarily due to the legal risks associated with Chairman Lee. Lee is anticipated to play a more active role in company management, thereby aiding Samsung in its efforts to boost its brand value,” Kim said.
As Kim put it, we hope the recent court ruling will help Lee to engage more actively in the management of the nation’s tech giant by mitigating judiciary risks and fostering the development of future business initiatives. The sustainability of Samsung, the nation’s No. 1 conglomerate, has a far-reaching impact on the nation’s economy.
A Seoul court ruled on Monday that Lee and 13 other former Samsung executives, charged with stock price rigging and accounting fraud, are not guilty. The prosecution has claimed that the Samsung executives rigged the valuations of Samsung C&T and Cheil Industries to enable Lee to strengthen his grip on the business group. While raising the share prices of Cheil, they also lowered the value of Samsung C&T for the benefit of the Samsung scion, the prosecution alleged. In the process, the prosecution said, Samsung even faked a financial statement of Samsung Biologics.
Yet the court ruled that the entire merger took place in due process, rebuffing the allegation that the merger inflicted losses on shareholders. It also rejected the prosecution’s claim over the alleged cooking of Samsung Biologics’ accounting books.
Given the court’s acquittal of all 19 charges Lee faced, the prosecution cannot deflect criticism for having pursued the cases based on wrong premises. The prosecution pushed to indict Lee, although its earlier request for an arrest warrant had been rejected. Furthermore, an advisory committee under the Supreme Prosecutors’ Office recommended the suspension of the investigation into the case and advised against indicting Lee. But the prosecution took flak for pushing ahead with the indictment.
Despite three years and five months of investigations, the prosecution has been unable to substantiate the charges. President Yoon Suk Yeol, ruling People Power Party (PPP) interim leader Han Dong-hoon and Financial Supervisory Service Governor Lee Bokhyun cannot shun responsibility as they were in charge of the investigations at that time.
Nonetheless, the court’s acquittal does not guarantee complete immunity for Samsung from legal risks. It means Samsung did not commit any apparent irregularities in the process of managerial succession. However, this does not imply complete exoneration for Samsung. For starters, Samsung should acknowledge that it had engaged in collusive deals with former President Park Geunhye. Samsung was found to have bribed Chung Yoo-ra, the daughter of Choi Soon-sil, a close confidant of Park, with a horse.
Lee had been engrossed in judiciary disputes since 2016. The recent court decision is expected to help resolve such “judiciary risks” involving Lee. Lee’s attorney welcomed the verdict, saying, “The court ruling clearly confirmed the merger proceeded in due process.” Business lobby groups expressed hope Samsung will be able to embark on active investments and job creation, thus contributing to economic revitalization boosted by the recent ruling.
Despite such expectations, however, Samsung should double down on efforts to secure more transparency and fairness in management. It needs to apply stricter standards in corporate management to prevent the recurrence of disputes regarding possible irregularities and ethical problems. In addition to the court ruling, efforts should continue to be made to address and improve managerial issues within the entire business sphere.