Why Samsung heir’s jailing will do little to dent its smartphone profits, in the short term at least
Donald Kirk says while Lee Jae-yong’s prison term doesn’t signal the downfall of the thriving electronics giant, it may indicate the start of a long-term, gradual reform process for South Korean conglomerates
It’s easy to feel sorry for Samsung’s Lee Jae-yong, led out of the Seoul district courtroom, found guilty of embezzlement and bribery, arms bound in ropes, clasped by guards on either side. He does not fit the picture of the scheming chieftain of Korea’s largest chaebol, or conglomerate. Seen on the street, he might be mistaken for a diligent salaryman: quiet, serious, neither flamboyant nor particularly tough.
The visual image is enough to convey the impression that Lee is the victim of powerful executives his father installed throughout the Samsung empire. He has the title of vice-chairman of Samsung Electronics, flagship of a group accounting for 20 per cent of Korea’s economy, and his tentacles extend throughout its 80 or so companies, but he’s also at the mercy of senior bureaucrats who know far more about corporate machinations.
Sadly, the whole case suggests that Lee was in way over his head after his father, Lee Kun-hee, suffered a heart attack more than 3½ years ago. The elder Lee retains the chairman’s title but remains unable to make decisions or participate in group strategy. In fact, JY, as he is known, was thrust into responsibilities for which he had been groomed for years by men whose advice he accepted.
This helps explain why Lee’s arrest and imprisonment, along with two of those executives, will not greatly impact Samsung Electronics sales worldwide. There should be no appreciable dent in earnings, whether he serves all of his five-year sentence or, as is likely, gets out earlier on probation.
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