Samsung deserves better treatment
*The author is an editorial writer of the JoongAng Ilbo.
An endless line formed in front of the Vietnam National Convention Center in Hanoi from the wee hours on Nov. 29, the day Samsung Vietnam administered the aptitude test for this year’s new hires. Over 3,243 applicants took the test for entry positions at Samsung Electronics, Samsung Electro-Mechanics, Samsung Display, Samsung SDI and Samsung SDS outposts in Vietnam. Samsung jobs are hugely popular among Vietnamese college graduates as they pay new recruits 10 percent to 15 percent more than other companies. Samsung is the most favored workplace among Vietnamese engineering students.
But Samsung does not have this kind of prestige at home. The conglomerate has become a synonym for corporate greed and other ills associated with family-run chaebol. Samsung’s name is more often seen in gossip pages than the business section since group heir and Samsung Electronics Vice Chairman Lee Jae-yong became indicted for bribery in a special probe on impeached President Park Geun-hye and her confidante Choi Soon-sil.
After serving a year in prison, Lee was acquitted in an appeals court that found Lee had involuntarily donated money and did not outright give bribes in return for the president’s influence in helping his hereditary succession. But the new government, filled with advisers, aides, ministers, and antitrust agency chief from progressive fronts that had long criticized chaebol, especially Samsung, has found fault with the company in every way.
The prosecution has been investigating Samsung’s unique union-free culture by accusing Samsung Electronics’ after-sales service unit of clamping down on union activities. The court denied the prosecution’s request for warrants to arrest executives for organizing the suppressions of union activities. The prosecution nevertheless pressed on with the arrest warrant.
Samsung Electronics and Samsung Display had to fight the government to stop it from exposing blueprints and details in the fabrication lines that could risk leaking their valuable technology that upholds Korea’s edge in the global components industry. Despite winning protection from the court and the Ministry of Industry and Trade, civilian organizations and the Ministry of Labor continue on with the pressure to release work site information to ensure the safety of cleaning room workers.
Samsung Group is also regularly urged by the Fair Trade Commission to overhaul its ownership and governance structure. The antitrust agency officially recognized Lee as the chief of the country’s biggest conglomerate and demanded that he address Samsung’s inter-affiliate cross-sharing structure. For the government agency, the objective is improving transparency at the country’s top business group. But to the management, hasty reorganization can be risky and costly.
The financial authority is pressing Samsung Life Insurance to get rid of its stake in Samsung Electronics without legal justification. Although the insurance law caps equity ownership in non-financial companies at the value of stock acquisition, the authority wants the life insurer to unload the shares at their market value. Samsung Life resists this pressure, not because it wants to, but because it simply cannot accept the demand. If it unloads 20 trillion ($19 billion) of equity, both the company and market could be wrecked. Financial Services Commission (FSC) Chairman Choi Jong-ku carried on with the pressure after the campaigner Kim Ki-sik, a lawmaker and civic activist, resigned as the governor of the Financial Supervisory Service (FSS).
Samsung BioLogics, a still-fledgling bioengineering arm of Samsung Group, is being groomed to be its next growth engine after semiconductors. It is under attack by financial authorities over accounting fraud allegation. Upon the request from the People’s Solidarity for Participatory Democracy — a chaebol watchdog whose members now dominate the presidential office and government regulatory offices — the FSS reversed its earlier findings to renew scrutiny of the bio company.
On May 1, the FSS sent a preliminary notice to Samsung BioLogics and its auditors about its conclusion of manipulating its biosimliar unit Samsung Bioepis’ books ahead of Samsung BioLogics’ initial public offering. It found fault with the equity stake value, which had been 300 billion won ($281 million), ballooning to 4.8 trillion won when the company shifted Samsung Bioepis’ status from subsidiary to an affiliate. But the valuation procedures had been reviewed by three top accounting firms and outside auditors before being approved by the FSS.
Samsung already paid a dear price for the 2015 merger between Samsung C&T and Cheil Industries that placed Lee and other executives behind bars for a year over allegations that Samsung donated money to Park and her confidante so that she could exercise influence over the National Pension Fund, a major institutional investor, so it would agree to the merger scheme. This led U.S. activist fund Elliott Management, which opposed the merger, to sue the Korean government for $670 million.
While under attack at home, Samsung is waging a lonely battle to fend off Chinese rivals backed by their cash-rich and powerful state. Samsung smartphones now take up a pitiful 1 percent share in the Chinese market. They also lost to Chinese rivals in the world’s second-most populous market, India.
Samsung generates 87 percent of its revenue overseas. If it continues to be shaken at home, that could accelerate offshoring. Samsung moved its mobile phone factory from Gumi, North Gyeongsang, to Vietnam in 2008. The relocation cost many jobs in the area. Instead of mercilessly lashing at the group, the government must respect its value and role. Samsung also must do more to raise transparency and generate jobs to regain confidence from its home country.
JoongAng Ilbo, May 11, Page 28
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