HOT HEIR

Samsung’s leadership vacuum is over, and so is the illusion of corporate reform in Korea

A high court in South Korea on Monday (Feb. 5) freed Samsung’s de facto heir Lee Jae-yong from serving any more time for his convictions for bribery and embezzlement last year—commuting a sentence that had been seen as a message to large Korean conglomerates over their cozy ties with politicians.

Lee, who had pled not guilty at trial, was convicted last year of paying millions of dollars in bribes to a confidante of impeached former president Park Geun-hye in order to win favor for a merger between group companies. He was sentenced to five years in prison. In its decision on Lee’s appeal, the court vacated or diminished some charges. It also shortened the sentence by half and suspended it, according to Korean news agency Yonhap. Lee is a senior executive at Samsung Electronics, the jewel of the entire Samsung group, and a member of the conglomerate’s founding family.

Samsung Electronics did not immediately reply to Quartz’s request for comment on Lee’s successful appeal.

Some analysts had argued that Lee’s absence would have little noticeable impact on Samsung Electronics’ bottom line, with his day-to-day duties in his role of vice chairman unclear. Judging by the company’s stock price in the months since his arrest in early 2017, investors weren’t fazed by Lee’s legal troubles.

But in October, a wave of top Samsung Electronics executives stepped down, moves that may have been intended to put pressure on the system to help the company avoid a leadership vacuum.

The most well-regarded of the company’s three CEOs, Kwon Oh-hyun, said he believed it was time “for the company [to] start anew, with a new spirit and young leadership to better respond to challenges arising from the rapidly changing IT industry.”

Some analysts say that apart from Lee’s status as the family-run conglomerate’s heir apparent, he was playing a role coordinating the company’s shift into artificial and intelligence software and AI initiatives, critical to Samsung’s future. Lee could have run the business from prison, as other convicted Korean businessmen had in the past (paywall). But Lee’s successful appeal means that Samsung won’t have to worry much about all that.

More broadly, in Korea, Lee’s trial marked somewhat of a litmus test for how the country’s family-founded conglomerates would fare under new president Moon Jae-in. The country’s courts have had a habit of letting its corporate moguls off easy when charged with crimes. But analysts said last year that with public anger over corruption contributing to former president Park Geun-hye’s impeachment, there was a real chance for corporate reform.

Today’s decision suggests that won’t happen anytime soon, and comes on the heels of other court rulings that appear somewhat soft on chaebol heirs. In December, Shin Dong-bin, the chairman of conglomerate Lotte Group, received a suspended sentence related to corruption charges on the gr0unds that he was not in a position to disobey his father’s orders.

Lee’s reduced sentence also harkens back to the case of his father, Lee Kun-hee, who has been little seen since a heart attack in 2014. In December 2009, the elder Lee, who had chaired the country’s Olympic committee, was pardoned after being convicted for tax evasion, in order to help with lobbying efforts for the 2018 Pyeongchang Olympics. Over eight years later, those games are set to begin this week. The makers of the official app of the games? None other than Samsung.

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