Lee Jaeyong Acquitted on Appeal... Management Activities Expected to Accelerate
Reduced Burden of Government Relations Raises Hopes for Greater Focus
Leader’s Decisions Set the Stage for a New Leap Through Large-Scale Investments
Samsung Electronics Chairman Lee Jae-yong is expected to put an end to his 'quiet leadership' following his acquittal in the appellate trial on charges of unfair merger and accounting fraud. There is also anticipation that the burden of defending against the chairman's judicial risks will be lifted, paving the way for him to focus on discovering new businesses and new technologies.
According to the business and legal circles on the 3rd, the Seoul High Court Criminal Division 13 acquitted Chairman Lee Jae-yong of charges including unfair trading practices and market manipulation under the Capital Markets Act, as well as breach of fiduciary duty, just as in the original trial.
Samsung Electronics Chairman Lee Jae-yong, who is on trial for unfair merger and accounting fraud charges related to management succession, is attending the appellate court sentencing hearing held at the Seoul High Court in Seocho-gu, Seoul on the 3rd. Photo by Kang Jin-hyung
Chairman Lee’s management activities have been restricted for ten years due to his involvement in the political scandal. In December 2016, when the impeachment motion against then-President Park Geun-hye was proposed, suspicions of accounting fraud at Samsung BioLogics also surfaced, placing him at the center of controversies over collusion between politics and business. As the trial continued, the inappropriate relationship between Samsung Group and the political sphere was highlighted, inevitably putting a brake on Samsung Electronics’ management activities with the chairman’s hands tied.
In February 2017, Samsung Group officially disbanded the Future Strategy Office, which had been identified as the channel for the political scandal, and announced the abolition of its government relations operations. However, in reality, it was difficult to loosen the reins. Since the chairman could not take the forefront, responding to government regulations or policy changes required more active behind-the-scenes efforts.
To defend against the chairman’s judicial risks, considerable energy had to be spent conveying the group’s stance not only to the Blue House and the National Assembly but also to organizations such as the prosecution. If Chairman Lee returns to the front lines of management, it is expected that this energy can be concentrated on normalizing management and discovering future growth engines.
First, Samsung Electronics decided to pay membership fees to the Korea Economic Association in November last year. This marked the final return of all the 'Big Four' groups that had previously withdrawn from the Federation of Korean Industries (FKI). With Chairman Lee’s acquittal, it is also expected that the issue of his return as a registered executive in the name of 'responsible management' will soon be settled.
'Technology the World Has Never Seen' Samsung Electronics, a Platform for a New Leap Forward
Samsung Electronics is currently facing an 'all-around crisis.' The most painful aspect is the slump in its core semiconductor business. There are criticisms that bold investment decisions were not made in time due to the chairman’s judicial risks.
SK Hynix, which has secured a leading position in the high-bandwidth memory (HBM) market, soared by posting record-high earnings, but Samsung Electronics fell short of expectations due to sluggish sales of general-purpose (legacy) memory and delays in HBM deliveries. The semiconductor business’s operating profit for last year was 15.1 trillion won, significantly trailing SK Hynix’s 23.4673 trillion won. The foundry business continues to record losses in the trillions of won.
There is hope that once Chairman Lee’s management activities gain momentum, Samsung Electronics can make another leap forward based on large-scale investments and innovations, including discovering future growth engines. If the company accelerates the development of the 'technology the world has never seen' that it has emphasized so far, long-term investments in fields such as semiconductors, artificial intelligence (AI), and biohealth will also become possible. The Future Business Planning Group, newly established at the end of 2023, will also be able to gain momentum.
In the business community, there is also speculation that Chairman Lee may move faster than expected. There is cautious talk of a dramatic meeting with Sam Altman, CEO of OpenAI, who is arriving in Korea tonight. Chairman Lee also traveled around Southeast Asia and other regions for overseas networking immediately after the first trial verdict last year.
A business official said, "When a chairman is shackled by judicial risks, the group’s capabilities inevitably focus more on 'defending the chairman' than on business promotion. If Chairman Lee returns to the front lines of management, areas that require the chairman’s decisive judgment, such as large-scale investment decisions and discovering future new industries, are expected to gain strength."
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