Averting arrest, Samsung leader is back at work

Industry

Published: 19 Jan. 2017, 20:03

Averting arrest, Samsung leader is back at work

Samsung has avoided the worst-case scenario of its acting top leader and vice chairman Lee Jae-yong being arrested, but it will take time for the conglomerate to return to normalcy as long as a court battle lingers for him.

The heir apparent of Samsung Chairman Lee Kun-hee headed directly to Samsung Electronics’ Seocho headquarters in southern Seoul on Thursday morning after spending the night at a detention center - an indication of the urgency of the situation.

Samsung said in a statement after the court’s rejection of an arrest for Lee, “It is fortunate that we could verify what’s true and not regarding his charges without detention.”

Samsung insiders appeared much more relieved.

“The time has finally arrived to allow us to place pending issues on the table,” said an executive at the future strategy office at Samsung Group, its decision-making body.

Ever since the corruption scandal surrounding President Park Geun-hye and her confidant erupted in October, major business decisions have been postponed at Samsung and other conglomerates.

The annual year-end reshuffle for executives, normally slated for early December, was pushed back indefinitely. The group has yet to unveil the schedule but insiders say the reshuffle likely will be carried out before the general shareholders’ meeting in March. The nation’s most valuable conglomerate has yet to set up business strategies for 2017 either.

The prospect for Samsung Electronics’ planned $8 billion acquisition of Harman International, a leading U.S. automotive component supplier and audio producer, is blurry. Harman’s shareholders filed a class-action suit against its CEO and board members in a Delaware court last week.

Shareholders claim Harman’s value has been greatly depreciated, leading to a flawed merger, and vowed to vote against the deal’s finalization, slated for September at the earliest. The suit follows U.S. hedge fund Atlantic Investment Management’s move in December to vote against the deal for the same reason. Lee is barred from leaving Korea, which makes it hard for him to directly tackle the issue.

Samsung is expected to wrap up investment plans this month and come up with a blueprint on how it would proceed with governance structure overhaul. The tech bellwether in November vowed to split itself into a holding company and an operating company in response to proposals U.S. hedge fund Elliott Management Corporation made a month earlier. Lee’s promise to disband the future strategy office is also up for discussion.

The chaebol community welcomed the court’s decision on Lee, while cautiously raising its voice that special prosecutors may need to reassess its direction in probing conglomerates, given its enormous repercussions on a local economy that is already struggling.

Samsung’s impact on the Korean economy is hard to ignore. The combined revenue of Samsung subsidiaries of more than 200 trillion won ($170 billion) accounts for almost a fifth of Korea’s gross domestic product.

“A number of suspicions and misunderstandings with regard to Samsung Group is hoped to be quickly resolved through upcoming judicial proceedings,” the Korea Employes Federation said in a statement.

Shares of Samsung Electronics ended 1.46 percent higher at 1,874,000 won.

BY SEO JI-EUN [seo.jieun@joongang.co.kr]