Samsung to split?

The world's second largest conglomerate may be broken up following the shock resignation of its chairman yesterday.

Last Updated: 06 Nov 2012
With its 59 divisions and joint ventures, Samsung employs 750,000 people all over the world and has interests in businesses as diverse as construction and shipbuilding as well as in the electronics for which it is internationally renowned. Of comparable global businesses, only GE is bigger. But following the surprise resignation of its chairman of 21 years, Kun Hee Lee, after he was indicted for tax evasion totalling $113m, there are signs that it may now be massively restructured or even dismantled completely. According to a corporate statement issued after the indictment, it is time for a ‘new starting point” and the company ‘is preparing reform plans based on advice from various sectors of our society.’ By the gnomic standards of the region, that is pretty seismic stuff. 

Lee – the country’s richest man and a national hero – did the deed in fine style, interrupting regular programming to deliver a brief live speech on national TV. ‘I will assume full legal and moral responsibility’ he said. And thus the boss of the country’s largest family-controlled chaebol – responsible for 15% of GDP – stood down.

Of course, corruption scandals are hardly unknown in this part of the world – the scale of corporate political bribery led to the coining of the phrase ‘cash trucking’ here a few years ago. But it’s an accepted part of business life and when details do emerge, those at the top are usually forgiven with impressive speed. Indeed Mr Lee himself was indicted in the 90s for payments made to two former South Korean presidents, before a third one let him off.

But this time things look rather different. For a start, the investigation was not prompted by indignant foreign investors or rival companies but by a Samsung in-house lawyer’s own allegations. And the fact of his resignation is unprecedented, as it leaves Samsung in the hands of non-family members for the first time in 40 years. 

Even Lee’s son has been hit in the fallout, banished to an overseas posting, far from the corporate centre. But at least he’ll have his trusty smartphone to help him keep in touch.

Seasoned Korea watchers suggest that occasional public scourges are necessary to keep foreign investors and customers happy, and that after the fuss dies down it will be back to business as usual. But we’re not so sure - if any real attempts are made to dismantle Samsung’s Byzantine corporate structure, the repercussions for the wider Korean economy will be immense. Watch this space – on your 56” Samsung plasma screen telly, natch.

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