Now Hear This!

Samsung’s chairman Lee Kun-hee has resigned his post at the South Korea conglomerate in the wake of an indictment over tax violations and bribery allegations (allegations we here at EDN have not-so-affectionately referred to as a “slush fund” in past blog posts).

Lee, 66 years old and the head of the family that started Samsung in 1938, had been expected to resign after two rounds of questioning by independent counsel sanctioned by South Korea's National Assembly and former president. Lee’s wife was also question.

Judging from reports out of South Korea today, the nation is in a state of shock and awe. His near-heroic stature there was well known. Lee built much of his reputation at Samsung (sometimes called the “Republic of Samsung” because of its far reaching and deep ties to the country and its revenue, accounting for about a fifth of South Korea's exports) on ethics. Indeed, his corporate message on Samsung.com notes ethics several times as a founding principle for the company.

“As the leading company in Korea, Samsung will work hard to meet global standards in our corporate practices. Samsung recently unveiled a new set of ‘management principles’ to be followed by all employees. Among the principles emphasized are adherence to laws and ethics, respect for customers and shareholders, and responsibility to the community,” his message reads. Lee’s full statement could be found here at the time of this blog post.

Under Lee, the company was named to Fortune magazine's “Global Most Admired Companies” list, climbing to No. 4 in the electronics category in 2004. “Our management ethics contribute a significant role in achieving this ranking,” Lee says in his online message.

Lee’s resignation statements were televised in South Korea. Despite other Samsung executives being named in the bribery scandal, he is taking full blame.

“I deeply apologize for causing concern to the nation and will take full responsibility for that," Reuters quoted the exec as saying.

A noble effort, for sure, but how Lee’s decision to fall on the corporate sword will affect Samsung is hard to determine, especially because his role thus far was hard to determine. While his presence as one of South Korea’s most powerful figures is unquestionable, his day-to-day role in Samsung’s dozens of companies was never made very clear. He may have Samsung in his blood, but really how much blood has been lost here for Samsung? Can it continue as an industry giant without Lee? Yes, it can, and the resignation may even prove to be beneficial to Samsung’s numerous companies.

According to reports, a disassembly of Samsung’s highly influential strategic planning office, which exerts power over the some 60 Samsung affiliates, is expected to come on the resignation. Sitting at the top of that affiliates list is Samsung Electronics, Samsung’s flagship company and the company we at EDN most focus on. There’s no way any one office or umbrella position like what Lee held as chairman can do what’s best for 60 companies. Without him and with a dissolving of the strategic planning office, or at least with a lessened grip, companies like Samsung Electronics should be able to make better decisions based on their immediate needs, not the needs of their dozens of sister companies. (Note: I said “should” -- not necessarily “will.”) So far, things seem stable and Samsung Electronics’ stock has not been impacted by Lee’s resignation.

Meanwhile, Lee is expected to keep hold of his investments in the group's companies, continuing to be the biggest individual shareholder in them, reports state.

Share your thoughts on Lee’s resignation, the scandal, or Samsung’s future below.

 --Suzanne Deffree, Managing Editor, News