Samsung's 'Day of Destiny'... Business Community Pleads for Leniency for Lee Jae-yong

Samsung Faces Peak Crisis in Retrial
Heightened Tension Over Reality of Leadership Vacuum
Key Question: Will Radical Compliance Culture Innovation Work?

Park Yong-man Submits First Petition in 8 Years as Chairman of the Korea Chamber of Commerce
SME and Venture Associations Also Appeal for Leniency for Vice Chairman Lee

[Image source=Yonhap News]

[Asia Economy Reporter Ki-min Lee] As the retrial verdict for Samsung Electronics Vice Chairman Lee Jae-yong's case related to the state affairs manipulation scandal approaches, the sense of crisis within Samsung Group is reaching its peak. Amid external adversities such as the novel coronavirus disease (COVID-19) and the US-China trade conflict, there are concerns that if a leadership vacuum occurs, various businesses and investments could come to a halt, dominating the entire group. Vice Chairman Lee's 'New Samsung' initiatives could also fall into uncertainty.

The Seoul High Court Criminal Division 1 (Presiding Judges Jung Jun-young, Song Young-seung, Kang Sang-wook) will hold the retrial verdict session for Vice Chairman Lee's bribery and other charges case at 2:05 PM on the 18th. The prosecution previously requested a 9-year prison sentence for Vice Chairman Lee during the sentencing hearing.

◆Beyond Samsung, the entire business community is on 'high alert'... Pleas for leniency

Ahead of Vice Chairman Lee's verdict, not only Samsung but the entire business community is in a state of extreme tension. Samsung employees, who have already experienced a leadership imprisonment incident once, believe that if the final responsibility holder, Vice Chairman Lee, becomes absent amid the prolonged COVID-19 crisis and the realization of the semiconductor supercycle (boom) and supply shortage, Samsung's management situation could falter. Furthermore, there is an internal sense of crisis that if Vice Chairman Lee is imprisoned, Samsung alone could fall behind in an atmosphere where global competitors are actively investing in facilities and mergers and acquisitions (M&A). A Samsung employee said, "Now that Chairman Lee Kun-hee has passed away, Vice Chairman Lee is the 'center of gravity' for the company," adding, "Since the company's fate is at stake, employees are nervously awaiting the trial results from early morning."

Not only Samsung but the entire economic sector is paying close attention to the verdict for Vice Chairman Lee. The impact on the Korean economy could be significant if Vice Chairman Lee is re-incarcerated. Park Yong-man, Chairman of the Korea Chamber of Commerce and Industry, submitted a petition to the Seoul High Court on the 15th, stating, "Considering my experience with Vice Chairman Lee and the weight Samsung holds in society, I hope he is given a chance." This is the first time in his 7 years and 8 months as chairman of the Korea Chamber of Commerce and Industry that Park has submitted a petition regarding a businessperson's trial.

Kim Moon-gi, Chairman of the Korea Federation of SMEs, also released a statement on the 17th, "We hope the judiciary shows leniency toward Vice Chairman Lee." Kim appealed, "While the wrongful aspects of the state affairs manipulation case must be corrected, considering Samsung's role and weight in our economy, Vice Chairman Lee should be given sufficient opportunity to exercise ownership to overcome the current COVID-19 crisis and lead our country's economic ecosystem."

Earlier, Ahn Geon-jun, Chairman of the Korea Venture Business Association, also submitted a petition on the 7th, stating, "Vice Chairman Lee's role is necessary for a symbiotic ecosystem between venture companies and large corporations."

◆Samsung is making groundbreaking innovations in compliance culture

The Samsung Compliance Committee, established by court order, has been leading Samsung's compliance culture innovation for the past year. The retrial court suggested to Vice Chairman Lee at the first hearing in October 2019 that a monitoring body for Samsung's compliance management be established. Accordingly, the Compliance Committee, chaired by former Supreme Court Justice Kim Ji-hyung, was launched in February last year and operates autonomously. Since early last year, the Compliance Committee has recommended that Vice Chairman Lee express his views on management succession, labor, and communication with civil society, and Vice Chairman Lee made a public apology in May last year to address these issues.

Moreover, potential legal controversies such as internal transactions and external sponsorships are being discussed in advance to prevent issues. In addition to conducting education for employees, the Compliance Committee has also established and operates a channel where executives and employees can report illegal activities by top management.

As a result, during the Compliance Committee's expert review process, although the special prosecutor and Vice Chairman Lee's side had differing opinions on the effectiveness and sustainability, former Constitutional Court Justice Kang Il-won, recommended by the court, gave a generally positive evaluation. Vice Chairman Lee has consistently stated at every opportunity, including his public apology, final statement in the retrial, and meetings with the Compliance Committee, that he will guarantee the effectiveness and sustainability of the Compliance Committee's activities.