by Song Jung-a , Financial Times
Lee Kun-hee, the emperor-like chairman of Samsung Electronics, has just identified corruption as one of the most serious problems that the technology giant has to tackle immediately.
The 69-year-old tycoon has expressed strong disapproval over unspecified irregularities of his employees at Samsung Techwin, a group subsidiary that makes defence equipment and precision machineries, and has signalled group-wide house-cleaning and stronger internal auditing.
Oh Chang-suk, chief executive of Samsung Techwin, stepped down earlier this week after some irregularities in the company’s dealings with suppliers were revealed through an internal inspection, although Oh himself was not personally implicated.
“Corruption and fraud at Samsung Techwin came to light accidentally but I think it is pervasive in the whole group,” Lee told reporters on Thursday. “This is a growing source of concern for me and I am going to take issue with it.”
At a weekly executive meeting on Wednesday, Lee urged the eradication of corruption in Samsung, saying the group’s “clean corporate culture” has been tarnished by the case. “Global companies have been forced out of markets due to internal corruption and complacency. Samsung can be no exception. All group members must realise the magnitude of problems that could arise, should they commit fraud,” the group’s chief spokesman quoted Lee as saying.
His comments should be welcome, as opaque governance and corruption have often been cited as one of the main factors for the so-called Korea Discount – the amount by which investors undervalue Korean stocks. “Although it seems belated, it is still meaningful and something to watch out for,” Lee Jae-oh, a leading politician from the country’s ruling party, said about the Samsung chairman’s comments.
However, it is ironic to see the head of the corruption-riddled chaebol (family conglomerate), who himself has been found guilty of tax evasion, to call for battle against corruption. Last year, Lee returned to the top job at Samsung, the world’s largest technology company by sales, after less than two years on the sidelines because of a corruption scandal. Although he was cleared of bribery charges, he was given a three-year suspended jail sentence in 2008 for corruption, specifically for his role in illicit deals with Samsung’s affiliates in an attempt to pass managerial control to his son, Lee Jae-yong.
The return of a criminally convicted boss to top management is unthinkable in the US or Europe but this is still common in Korea, where corrupt tycoons often go unpunished or pardoned by the president for various reasons. In Lee’s case, he was pardoned at the end of 2009 in order to lobby to win the 2018 winter Olympics.
Critics say Lee is the last person to talk about corporate responsibility. If he is serious about weeding out corruption in corporate Korea, he should stay out of corporate life because his call for reform and transparency would not be so persuasive to the general public, they say. After all, it is the corrupt bosses that undermine investors’ faith in Korea’s corporate governance.
Source: Financial Times