Samsung, the number one company in the business world, has been in a state of’complete management blank’ for a while.
This is because Samsung Electronics Vice Chairman Lee Jae-yong, who was sentenced to two years and June in jail at a repatriation trial for bribery in relation to the Gukjeong Nongdan case, was quarantined in a living room at the Seoul Detention Center for four weeks. Due to the spread of Corona 19 initiated by correctional facilities, general interviews other than lawyers are not permitted during this period. Accordingly, it is impossible for the time being to visit Samsung management. As reports and decision-making on major management issues are postponed, serious disruptions to’outdoor management’ are expected to be inevitable.
According to the Ministry of Justice on the 19th, Vice Chairman Lee received a rapid antigen test for Corona 19 at the Seoul detention center the day before and it was negative. The Seoul Detention Center has placed Vice Chairman Lee as a living room to isolate new and existing prisoners.
Vice-Chairman Lee will undergo an additional gene amplification (PCR) test after quarantine for four weeks according to the guidelines of the correctional authorities. Containment is lifted when a final negative test is received at the second examination, but general interviews are not allowed until the final negative test is received, and visitation is limited only to lawyers. The way to directly report major issues from the management and to be involved in decision-making based on them is blocked.
Vice-Chairman Lee is expected to start operating prison after a four-week quarantine period, but even this is a thorny road. This is because there are still judicial risks surrounding Vice Chairman Lee. Immediately under arrest, he must go to a trial related to allegations of illegal succession of management rights. The trial was initially scheduled to open on the 14th for the second trial, but it has been postponed indefinitely due to the corona 19 recurrence.
Meanwhile, James Kim, chairman of the American Chamber of Commerce in Korea, said at an online New Year’s press conference that day, “Vice-Chairman Lee’s reincarceration is an example of how excessively criminally guilty of executives is being held in Korea.” He criticized, “It’s disrupting business activities.”
[노현 기자 / 홍혜진 기자]
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![As Samsung Electronics Vice Chairman Lee Jae-yong was arrested in court on the 18th in the case of the'Kukjeong Nongdan' case, there is a concern about a management vacancy. The picture is a panoramic view of Samsung Electronics' Seocho building on the 19th. [이충우 기자]](https://i0.wp.com/file.mk.co.kr/meet/neds/2021/01/image_readmed_2021_61343_16110459944512659.jpg?w=560&ssl=1)
As Samsung Electronics Vice Chairman Lee Jae-yong was arrested in court on the 18th in the case of the’Kukjeong Nongdan’ case, there is a concern about a management vacancy. The picture is a panoramic view of Samsung Electronics’ Seocho building on the 19th. [이충우 기자]As Samsung Electronics Vice Chairman Lee Jae-yong was arrested in court at the ruling of the Gukjeong Nongshim, concerns about a void in management rights due to the absence of the control tower are becoming reality.
Vice-Chairman Lee was expected to go to prison management while receiving direct reports of major issues during imprisonment, but due to the spread of Corona 19 in correctional facilities, the limitations are clear, such as being quarantined for four weeks after being imprisoned in detention centers. According to Samsung and the industry on the 19th, management of major affiliates, including Samsung Electronics, will sooner or later hold a bereavement or an emergency presidential meeting centered on electronic affiliates and seek countermeasures following the arrest of Vice Chairman Lee.
A Samsung official said, “While the CEOs of each company will carry out their daily work without problems, it is difficult for professional managers to make important decisions such as investment, so why not look for a way to minimize the vacancy of this vice chairman?” “There is a possibility that the presidents will come together and face each other sooner or later to prepare a’Plan B’to overcome the current crisis situation.”
As such, while Samsung Electronics and its affiliates are focusing on managing the current business situation while reinforcing the CEO’s autonomous management system, Vice Chairman Lee is expected to go to prison management.
Even when he was arrested for one year from February 2017, Vice Chairman Lee was reported to have been directly reported on important issues from the management and was involved in some decision making. Representative examples include the dismantling of the’Future Strategy Office (the unprecedented room), which has served as the group’s command tower,’ and the decision to invest 30 trillion won by 2021 at the completion ceremony of the Pyeongtaek semiconductor production line in Gyeonggi-do in July of that year. Issues that require immediate decision-making are expected to be reported directly to Vice-Chairman Lee, but it is analyzed that there will be physical limitations in making important decisions in detention centers unlike in the past in detention.
First of all, during the four-week quarantine period, general interviews other than lawyers are restricted, and major executives such as Hyun-ho Jung, President of the Project Support Task Force (TF) and In-Yong Lee, President of External Cooperation, meet with Vice-Chairman Lee to discuss current issues.
After the quarantine period, allegations of illegal succession of management rights and trials are expected to intensify. In addition to the company’s work, Vice-Chairman Lee has to deal with the burden of resolving the inherited property inherited from the late Samsung Electronics Chairman Lee Kun-hee and the provision of enormous income tax resources.
In order to finance the inheritance tax, important decisions such as the sale of some stocks are needed.
Inside and outside of Samsung, there are concerns about a post-storm due to the absence of the control tower. In fact, the vacancy period of Vice Chairman Lee, which started from the beginning of the new year, is similar in many ways to that of Chairman Lee Kun-hee’s retirement in 2008, which swayed Samsung Electronics.
For 23 months until Chairman Lee officially returned to management on March 24, 2010, Samsung Electronics went through a tunnel of congestion and sluggishness. Right now, in the fourth quarter of 2008, it posted a deficit of 740 billion won. In 2009, the following year, Apple’s’Smart Phone Shock’ hit. Apple opened the smartphone era with the release of its first iPhone in 2007, and has been dominating the market for a while.
On the other hand, since the second half of 2007, Samsung Electronics has seldom devised a countermeasure strategy against Apple by investigating slush funds targeting Chairman Lee. In June 2008, it launched the ‘1st generation Omnia’ smartphone, but it was only criticized by consumers around the world for its low quality.
In the semiconductor sector, in September 2008, the world’s largest flash memory company, SanDisk, proposed to acquire SanDisk for $5.85 billion (about 6.7 trillion won), and then withdrew it after a month. Showed. The Samsung Electronics New Business Promotion Team, which was launched in 2006, also failed to speed up at all in new businesses such as new renewable energy and healthcare, except for biosimilars (replicas).
Samsung established an independent management system for each affiliate by establishing an independent management system by establishing a presidential council of 40 affiliates during the period of Chairman Lee’s vacancy, but the crisis at Samsung Electronics was resolved only after Chairman Lee returned in March 2010. The Galaxy S series, which was first released in June 2010, surpassed Apple and rose to the top of smartphone sales in the third quarter of 2011.
Meanwhile, the absence of Vice-Chairman Lee could be prolonged for longer than Lee’s 23 months, and the business community is concerned that the shock that Samsung Electronics faced in 2021 would be greater than 13 years ago. Right now, there is a trial for illegal succession of management rights.
The legal profession expects a prolonged trial on suspicion of succession of management rights. Considering the fact that it took four years for the Gukjeong Nongdan trial to be sentenced to remand for destruction, there are many views that it would take at least three years to five years for the conclusion of this trial, which has a much larger case.
In addition to trials on alleged illegal succession of management rights, ongoing trials over Samsung Group are pending. There is a case of suspicion of destruction of evidence by Samsung Biologics as a trial in the appeal trial stage.
This trial contends whether Samsung executives and employees have destroyed the evidence in connection with the alleged fraudulent accounting of Samsung Biologics. Earlier in the first trial, the vice president of Samsung Electronics and others were sentenced to imprisonment. Since the prosecution insists that the destruction of evidence at Samsung Biologics was also carried out at the order of Vice Chairman Lee, the possibility of further prosecution by Vice Chairman Lee cannot be ruled out if the charges are convicted.
[노현 기자 / 이종혁 기자 / 홍혜진 기자]
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