What A Tech Leader's Corruption Conviction Means For Samsung And South Korea

What A Tech Leader's Corruption Conviction Means For Samsung And South Korea

By Juhye Lee, Breaking News NPR, Aug.25,2017

(Samsung Group heir Lee Jae-yong arrives at Seoul Central District Court on Friday.

Chung Sung-jun/AFP/Getty Images)

A court in South Korea has found the de facto leader of Samsung, Lee Jae-yong, guilty in a corruption case involving South Korea's former president. The court in Seoul sentenced the billionaire Lee to five years in prison on a string of corruption charges, including bribery, embezzlement and perjury. Here's what you need to know:

What's Lee going to jail for?

Lee, who also goes by the name Jay Y. Lee, was ensnared in the scandal that led to the historic impeachment and removal of South Korea's former president, Park Geun-hye, this March. At issue for Lee was whether he helped donate Samsung money to slush funds started by the president's consigliere in exchange for government support of a controversial Samsung merger.

The merger, which was approved, was good for the family control of the company, but widely seen as not favorable for shareholders. Ultimately the court ruled there was sufficient evidence that bribery was involved there. Samsung has now responded, saying it cannot accept this decision and it's confident Lee will be acquitted on appeal.

What does this mean for the future of Samsung?

In terms of its bottom line, possibly very little. Lee has been incarcerated for months as his trial has gone on. During that time, Samsung's business has been booming. It recently released its new Galaxy S8 phone, marked its strongest quarter in its history and overtook Apple as the world's most profitable tech company.

But this conviction raises bigger questions about the company's long-term direction, leadership and whether the group should continue to be a family-run dynasty. Lee is the third-generation head of a giant, publicly traded conglomerate, and critics say that kind of governance is outdated.

What does the downfall of the leader of South Korea's largest and most culturally significant company mean for the country?

This was closely watched by the public here because giant, dynastic conglomerates — or chaebol as they're called here — dominate the economy in South Korea. Chaebolliterally translates to "wealth clan." And Samsung is the largest and most significant example of that. It not only makes electronics, but is also involved in shipping, insurance, pharmaceuticals, department stores, hospitals, even bakeries.

South Korea's economic miracle — leap-frogging from poverty to becoming one of the wealthiest countries in the world within a generation — happened because government and these conglomerates were so closely linked. But in recent years, the public has grown critical of how easily chaebols seem to get out of trouble.

They have become avatars for cronyism and corporate excess. That's why this Jay Y. Lee case became symbolic in South Korea, where its business and government culture could be at a turning point. The majority of the public that voted in the current progressive president, Moon Jae-in, signaled it wants an end to the sense that business can buy off the government.

What happens next for Jay Y. Lee, the convicted leader of Samsung?

His lawyers say he will appeal the decision. They have maintained he was innocent and didn't know about the money being funneled while he was at the helm. Lee could be pardoned, but there's only an outside chance of this given the new president's support for overhauling chaebols. Lee's father, who famously ran Samsung with an iron fist, was twice convicted of business-related crimes like bribery, but got off with a suspended sentence and a pardon.

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