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What Park’s corruption scandal cost Samsung

Feb. 5, 2018 - 18:09 By Bae Hyun-jung
The court’s suspended sentence Monday at last released Samsung Group’s heir apparent Lee Jae-yong from imprisonment over his connection to the extensive scandal involving former President Park Geun-hye.

During the 353 days of its de facto chief’s imprisonment, the nation’s top conglomerate has had a bumpy ride, despite record-breaking earnings.

The first of the changes was the dismantlement of the group’s 58-year-old Corporate Strategy Office in March last year in response to accusations that the headquarters orchestrated funding related to Park’s confidante Choi Soon-sil, who was at the center of the scandal.


“We once again would like to apologize for causing trouble and concerns to society,” Lee Joon, then-Samsung’s chief communications officer, said at a press briefing held on the last day of a 90-day independent counsel probe into the corruption scandal involving Park and Samsung.

The corporate restructuring was followed by personnel reshuffles of top-level executives.

The group’s unprecedented move led to concerns that Korea’s largest conglomerate would face a downturn, especially in the highly competitive IT sector, as the manufacturing-oriented country was facing headwinds in the global race.

Disproving such apprehension, however, the group’s flagship Samsung Electronics overachieved in sales performance throughout 2017.

According to data from the Financial Supervisory Service, the electronics company tentatively achieved an all-time high operating profit of 53 trillion won ($49.6 billion) and consolidated sales of 239.6 trillion won, up 83.5 percent and 18.7 percent respectively from a year earlier.

The feat was backed by a boom in the semiconductors sector, which had been a result of investments in the years prior.

The company also rose two notches from the previous year to rank fourth, with its brand value amount jumping 39 percent to $92.3 billion this year, according to British corporate valuation and strategy consultancy Brand Finance.

Despite such achievements, the conglomerate has been weighed down by a leadership vacuum amid a global industrial transition period, as it suffered a lull in making strategic decisions.

During Lee’s yearlong imprisonment, the electronics company has been scarce in the merger and acquisition market, with its latest being the acquisition of US automotive electronics maker Harman in November 2016.

Also, its overseas performance in the smartphone business faltered, with its market share in China sinking to the 1 percent range and its No. 1 position in the Indian market outrun by Chinese rival Xiaomi for the first time in eight years.

Global rating agency Standard & Poor’s, while maintaining Samsung’s credit rating level in August last year, had pointed out that a prolonged leadership vacuum would set back key strategic decisions, including M&As.

Fitch also said that strategic decisions and timely investments are crucial for front-runners in the fast-paced electronics industry.

By Bae Hyun-jung (