Samsung should emerge stronger from the scandal
In its half-decade of escalation, the most recent chaebol the scandal oscillated between the spectacle, the shame and Samsung. Bite an unsupervised puppy; extensive cash payments for favors; a shaman at the heart of government; the historic impeachment and imprisonment of a president; a gift show jumping horse; millions of demonstrators in the streets.
Last week, in an outcome that underscored the scale 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 is tempting, say Samsung watchers, to view this whole protracted affair as the business of Korean companies. 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 Korea’s national project.
Lee’s Forced Membership of Jailed Korean Business Executives’ Club Rekindles Debate Over Samsung’s Extraordinary Position, 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 business has become more entrenched.
The scandal has galvanized critics who say Samsung’s scale is too focused on talent and suppressing innovation elsewhere in Korea. But the company’s attraction 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 raises the question of how far Samsung – as world’s leading 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 view that Samsung’s importance will decline from here on out. . the sprawling business system which the group represented, and which was revered as a nation-building tool, was made obsolete, slavishly attached to non-essential parts of the empire and vulnerable to disruption in a digital world. Particularly if the government cools its endorsement of its global corporate champion.
At the same time, attitudes towards Samsung could harden, as the heirs of the late patriarch of the group face a inheritance tax invoice for about $ 10 billion that could force the sale of much of the company, diminishing its sense of impregnability. Additionally, the 18-month jail term for Mr. Lee, 52, leaves Samsung at risk. Without necessarily reducing its overall influence over the conglomerate, this takes it away from the kind of split-second decision-making that global trade demands.
Perhaps the biggest blow, however, 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 mentionned in May, he had no intention of handing over control to his children. His comments were met with skepticism. In fact, said Geoffrey Cain, author of Samsung on the rise, 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 one. chaebol without a family owner.
In the face of all this, 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 it long ago should have.
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 shows a strong demand for products on which Samsung is dominant. Its investments in artificial intelligence seem premonitory. The global roll-out 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 might look like a reckless concentration of resources – until it surprisingly pays off and protects it. 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 came out much stronger. It wasn’t Ragnarok; it is not either.