In its half-decade of escalation, the most recent chaebol The scandal oscillated between spectacle, shame and Samsung. Bites an unsupervised puppy; large cash payments; a shaman at the heart of government; the historic indictment and imprisonment of a president; a show jumping gift horse; millions of protests in the streets.
Last week, in an outcome that highlighted the dimensions of the scandal, the authorities reincarcerated Lee Jae-yong, de facto head of the Samsung group and the most powerful entrepreneur in the country, for corruption. It was a disproportionate debacle for an extremely disproportionate company.
It’s tempting, Samsung watchers say, to think of this whole long affair as a Korean business Ragnarok moment: a messy fall of industrial gods and the glittering structures they built, from which a new, cleaner world could be born. The reality is that Samsung could come out of it all even more powerful and more central in the Korean national project.
Lee’s forced membership in jailed Korean business leaders’ club reignites debate over the extraordinary position of Samsung, the largest family-owned company chaebol business empire, representative more than a quarter of the value of the Seoul Stock Exchange. The nation’s well-defined love-hate relationship with the company has become more deeply rooted.
The scandal has galvanized critics who say Samsung’s ladder is over-focusing talent and suppressing innovation elsewhere in Korea. But the company’s appeal to the country’s top graduates survives, and many view the attack on Korea’s most precious gem as politically motivated. At its most basic level, the scandal begs the question of how far Samsung – as the world’s largest manufacturer of memory chips and smartphones – must both define the ambitions of the Korean economy and be controlled by the state.
There are a number of arguments, says Sea-jin Chang, a professor at the National University of Singapore, to support the scandal theory as a turning point and the idea that Samsung’s importance will decline from here. . the sprawling trading system that the group represented, and which was revered as a nation-building tool, has been rendered obsolete, slavishly attached to non-core parts of the empire, and vulnerable to disruption in a digital world. Especially if the government cools its approval of its world champion company.
At the same time, attitudes towards Samsung may harden as the heirs of the late patriarch of the group face a inheritance tax bill for around $ 10 billion that could force the sale of large parts of the company, diminishing its sense of impregnability. Additionally, the 18-month jail term for Mr. Lee, 52, leaves Samsung at risk. While not necessarily reducing its overall influence over the conglomerate, this removes it from the kind of split-second decision-making that global trade demands.
Perhaps the hardest blow lies in the roots of the scandal: the machinations demanded by the cross-shareholding structure through which the Lee family maintains control of the group. Lee said in May, he had no intention of passing control to his children. His comments were met with skepticism. In fact, said Geoffrey Cain, author of Samsung Rising, the means by which he could do so were probably closed even if he wanted to. This leaves Lee in a jail cell with the devastating, losing thought that after him Samsung could become the first big chaebol without a family owner.
In the face of it all, said Jun Kwang-woo, South Korea’s former chief financial regulator, Samsung’s market power and the importance to the economy is set to grow. Selling businesses would force Samsung to follow a learning curve of divestment and downsizing that it should have taken a long time ago.
The Covid-19 pandemic has created huge demand for the main products – televisions, smartphones and screens – of Samsung’s flagship electronics business. A global chip shortage testifies to the growing demand for products in which Samsung is dominant. Its investments in artificial intelligence seem premonitory. The global rollout of 5G mobile services is a chance for Samsung to gain even more market share.
According to strict portfolio management theories, Mr Jun said, South Korea’s reliance on Samsung could look like an imprudent concentration of resources – until it is hugely profitable and isolated. the economy of a crisis that beat other countries.
It’s easy to forget how Samsung and others chaebol, such as LG Electronics, collapsed during the Asian financial crisis of 1997. In fact, they appeared to be much stronger. It wasn’t Ragnarok; it is not either.