Samsung’s Lee cracks whip on unit

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Samsung’s Lee cracks whip on unit

Samsung Electronics’ chairman, Lee Kun-hee, was furious over corrupt activities discovered in an audit of a Samsung Group affiliate and demanded an end to all improper behavior.

The nation’s largest conglomerate, Samsung Group, said yesterday that a recent internal audit on Samsung Techwin, a unit in charge of defense industries, transportation, surveillance, power systems and semiconductor components, found corrupt activities among employees.

Lee delivered a strong reprimand, resulting in the resignation of Samsung Techwin’s CEO, Oh Chang-suk.

Although group officials didn’t reveal details, it said employees were found guilty of improper conduct but not illegal activity.

“Chairman Lee strongly criticized the situation for damaging Samsung’s clean corporate culture, which has been a point of pride for a long time,” said Rhee In-yong, senior vice president of Samsung Group, during a press briefing.

“The chairman also said that he has worries about whether the audit process was properly conducted, and whether punishments of wrongdoers have been appropriate.”

Samsung Techwin is one of the nation’s largest defense contractors, with about half of its 3.2 trillion won ($2.9 billion) in sales in 2010 from the defense industry. It makes the K9 selfpropelled howitzer, which has had a troubled past.

In 2009, both Samsung Techwin and its subcontractor were accused of raking in large profits by inflating the cost of producing the guns. K9s have also been found faulty, including during the shelling of Yeonpyeong Island last year, when several artillery guns failed and couldn’t be used to fire back at North Korea.

While some analysts expected the problems described by the chairman to be related to the K9, Rhee said during the briefing that they didn’t.

After the recent trouble, Lee said that the group’s auditing unit will be separated and strengthened with more qualified personnel to keep Samsung clean.

He warned of global companies that were wiped out overnight due to complacence and corruption.

“Samsung Techwin’s CEO offering to resign was a sign of showing responsibility as head of the company and for the wrongdoings of employees, although he had nothing to do with the recent incident,” said a Samsung Group official.

Industry analysts said the problem must have been significant because Samsung’s CEOs don’t quit over minor mistakes.

Lee has been reporting to work at Samsung Electronics’ headquarters in Seocho-dong, southern Seoul, on Tuesdays and Thursdays to tighten up the running of the group. Lee doesn’t usually engage with the press.

Samsung officials said the Samsung Techwin wrongdoers will be punished and that the subsidiary will announce a new CEO soon.


By Jung Seung-hyun [seungjung@joongang.co.kr]

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