The Key Issue in Lee Jae-yong's Retrial: 10 Months Since the Launch of the Compliance Committee... What Has Been Done?

Vice Chairman Lee Jae-yong Leads Public Apology
Monitors Internal Transactions of Affiliates Through Regular Meetings... Also Provides Compliance Management Training for Executives and Employees

Kim Ji-hyung, Chairman of the Samsung Compliance Committee, is presiding over the '1st Meeting of the Samsung Compliance Committee' held on the 5th at Samsung Life Seocho Tower in Seocho-gu, Seoul. The Samsung Compliance Committee is an independent external organization established to eradicate illegal activities by executives and employees, including CEOs of major Samsung affiliates, and to strengthen compliance management. Photo by Kang Jin-hyung aymsdream@

[Asia Economy Reporter Ki-min Lee] The activities of the Samsung Compliance Committee, which are expected to be a key issue in the retrial of Samsung Electronics Vice Chairman Lee Jae-yong in the state power abuse case, are once again drawing attention.

According to the legal and business circles on the 24th, the Seoul High Court Criminal Division 1 (Presiding Judges Jung Jun-young, Song Young-seung, and Kang Sang-wook) will hold a preparatory hearing for Vice Chairman Lee's retrial at around 2 p.m. on the 26th. Although the defendant is not obligated to attend the preparatory hearing, the court has unusually issued a summons, and Vice Chairman Lee is expected to appear in court.

At the preparatory hearing, the court plans to explain the procedure for assessing the effectiveness of the Compliance Committee and hear opinions from both Vice Chairman Lee's side and the special prosecutor Park Young-soo's team.

Previously, the court appointed former Supreme Court Justice Kang Il-won as a professional investigator for the Compliance Committee ex officio. In response, the special prosecutor submitted an opposition statement, citing reasons such as the court appointing a professional investigator outside the preparatory hearing and appointing only one investigator from the court side instead of the usual three.

However, since the special prosecutor has somewhat retreated from previously opposing the professional investigation of the Compliance Committee itself, it is expected that the court will likely proceed with the professional investigation of the Compliance Committee.

◆Compliance Committee, Prompting Vice Chairman Lee Jae-yong’s Apology from Early Stages

[Image source=Yonhap News]

The 10-month activities of the Compliance Committee are expected to be reexamined throughout the retrial. Earlier, in October last year, the retrial court ordered Vice Chairman Lee to establish an effective compliance monitoring system. In response, Samsung appointed former Supreme Court Justice Kim Ji-hyung as chairman in January, and the Compliance Committee officially launched in February.

Shortly after its official launch on February 13, the Compliance Committee urged an apology and measures to prevent recurrence regarding Samsung’s unauthorized access to employee and civic group sponsorship records. Samsung apologized and pledged to prevent recurrence.

In March, the committee also ordered Samsung and Vice Chairman Lee to directly clarify their positions on issues that had been criticized by civil society, such as management succession, labor union matters, and communication with civil society. Accepting the committee’s recommendations, Vice Chairman Lee made a public apology in May, expressing his intention to abandon no-union management and to engage in communication with civil society, and pledged not to pass on management rights to his children. Because of this, business circles have analyzed that the Samsung family, including Vice Chairman Lee, might choose a collective governance structure separating ownership and management, similar to Sweden’s Wallenberg family, moving away from long-term owner management. Moreover, Samsung dismissed worker Kim Yong-hee, who had been on a high-altitude protest, reached an agreement with Samsung after Vice Chairman Lee’s apology, and came down to the ground.

Additionally, the Compliance Committee holds regular monthly meetings to discuss internal Samsung matters. Judging that internal transactions could potentially violate the Fair Trade Act and other laws, the committee has implemented a procedure to report and obtain approval from the committee before the board of directors for internal transactions exceeding 5 billion KRW among affiliates. Furthermore, the committee continuously conducts lectures and training on compliance management and labor-management cooperation for employees. It has also created a website to receive reports on any illegal activities within Samsung.

A business insider commented, "Since the launch of the Compliance Committee, immediate recommendations for apologies regarding issues and Samsung’s prompt acceptance have been occurring, and labor-management negotiations are actively progressing, indicating that Samsung is changing."