Samsung boss avoids jail, again

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meYES IT IS it’s been a while since Lee Jae-yong didn’t have a court date in his diary. In 2017 the scion of the family that controls Samsung, the most powerful in South Korea chaebol (conglomerate), accused of bribing an associate of Park Geun-hye, who was the country’s president at the time. After being found guilty that year, he was in and out of prison before being paroled and finally pardoned in 2022. In 2020, in the middle of the saga that, it was issued for stock price manipulation, breach of trust and fraud investigation. He has since made 95 trips to the Seoul Central District Court.

Mr Lee’s timetable is finally clear. On February 5, the court acquitted him, and 13 other Samsung employees, of all charges. Mr Lee hopes to put his legal troubles behind him and get back into business.

Both cases resulted from the merger of Cheil Industries and Samsung in 2015 c&T, the group’s unofficial holding company and major shareholder in Samsung Electronics, its crown jewel. The deal, which valued each Cheil division at just under three Samsung c&T shares, control of Samsung from the ailing Lee Kun-hee, the group’s chairman, to his son, the younger Mr Lee, who was Cheil’s largest shareholder but had a small stake in Samsung c&T.

Prosecutors said Mr Lee and his co-conspirators engaged in underhanded practices to boost Cheil’s value relative to Samsung c&T. These included spreading false information and illegally lobbying the South Korean pension fund, a major shareholder in Samsung c&T. One purpose of this scheme, prosecutors said, was to tighten Mr. Lee’s grip on the group. As a result, other shareholders lost out. The court ruled that prosecutors had not provided enough evidence to prove either that the merger was to give control of the group to Mr Lee or that shareholders had suffered financial loss. .

Mr Lee, who maintains his innocence, asked the court to free him so he could focus on “moving the company forward”. Now that he is, he has a lot to do. A slowdown in parts of the chip business, Samsung’s main cash cow, has cut Samsung Electronics’ operating profit for 2023 to just $5bn, its worst result since 2008 and down from a peak of $54bn in 2018. Profits from memory chips , a special Samsung, built in the last quarter of 2023. But Mr. Lee still faces challenges, from the Sino-American tech war to tougher competition.

Then there are domestic politics. If the less business-friendly Democratic Party retains its majority in April’s general election, it could revive a bill that would prevent insurers from holding too much in individual companies . This would force Samsung Life Insurance, the largest shareholder in Samsung Electronics, to sell most of its stock. That would then put Mr Lee in control of Samsung Electronics, which he will use through Samsung Life Insurance, which owns Samsung c&T is the largest shareholder. To maintain it, he may have to simplify the Byzantine corporate structure of the conglomerate.

Mr Lee’s release could still benefit his family’s business. South Korean capitalism, not so much. Last year a World Bank arbitration court found that the government had improperly intervened in the controversial merger. That the Seoul court has now let its architect off the hook reinforces sentiment among many investors that chaebol heads can do as they wish.

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