Samsung boss expected to solidify leadership after receiving pardon

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IANS | 12 Aug, 2022
Samsung's Vice Chairman Lee Jae-yong was given a presidential pardon on Friday, in a move widely expected to help him consolidate his leadership and speed up business decision-making in the country's biggest conglomerate.

The decision comes as the tech giant has been faced with intensifying global competition from smaller rivals, including those in China, and growing economic uncertainty from global inflation, monetary tightening and worries over an economic slowdown.

Earlier in the day, President Yoon Suk-yeol approved his first special pardons for Lee, Lotte Group Chairman Shin Dong-bin and 1,691 others on the occasion of the Aug. 15 Liberation Day anniversary. Yoon said the pardon was expected to help the country "overcome the economic crisis."

Samsung heir Lee was sentenced to 2 1/2 years in prison in a bribery case involving former President Park Geun-hye and released on parole in August last year. His prison term officially ended July 29, but he still needs a pardon to have all his rights reinstated, reports Yonhap news agency.

"I am really thankful that I am given another chance to start anew," Lee said in a statement right after the pardon decision was announced.

"I will work harder to fulfill my responsibility as a businessman and help the economy by creating more jobs for young people," he added.

Lee's supporters had demanded the government pardon him so that he could assume his role freely at Samsung Electronics, the crown jewel of the group and the world's largest memory chip and mobile phone maker.

Lee's "absence," they argued, could hurt the performance of the company, the largest contributor to Asia's fourth-largest economy, at a time when global rivalry over chip manufacturing has intensified and chip shortages have hobbled the production of cars and consumer electronics.

With the pardon, Lee is expected to take a more decisive leadership role.

Like many global tech companies, Samsung is facing economic headwinds from global recession fears and high inflation that have cut into consumers' purchasing power. The semiconductor cycle has been showing signs of peaking out after more than two years of pandemic-fueled robust growth.

Samsung shares have dropped more than 23 percent since the start of the year, far underperforming the KOSPI market's 15 percent decrease.

In recent months, Samsung has stepped up efforts to build up networks and meet key clients and partners, including ASML, one of the company's biggest chipmaking partners and the sole maker of extreme ultraviolet (EUV) lithography systems, which is essential to make advanced chips.

Samsung has been also actively looking for potential M&A targets in a wide array of businesses, including chips. Senior executives have hinted multiple times for months that a deal could come sooner than later.

Earlier this year, Samsung announced a massive investment plan for the next five years, in particular to sharpen its competitiveness in the chip industry.

The tech giant said it will invest 450 trillion won (US$355 billion) in semiconductors and biopharmaceuticals in the span of five years, 80 percent of which will be used for research and development and nurturing talent in South Korea, especially in advanced chipmaking.

"I think the pardon will help the company make long-term and big business decisions more confidently, including possible M&As and investment," Greg Roh, head of technology research at HMC Investment & Securities, said.

Market watchers say that Lee could be promoted, within this year, to chairmanship of Samsung Electronics, a position that has been left vacant after his father Lee Kun-hee died in October 2020. The junior Lee assumed the vice president position in December 2012.

Meanwhile, in the eyes of activists calling for better corporate governance, Friday's pardon is yet another example of the country's leniency toward business tycoons convicted of white crimes.

His father was convicted of embezzlement and tax evasion but was given a presidential pardon in December 2009 in the name of "national interest."

"We deplore the Yoon government's 'selective justice' with leniency toward chaebol leaders," said People's Solidarity for Participatory Democracy, one of the country's most active civic groups.

Lee's legal battle, however, has not ended yet. He has been on a separate trial over the 2015 merger between two Samsung affiliates and alleged accounting fraud at the pharmaceutical unit Samsung Biologics. The merger and fraud are widely seen as key steps to strengthen his grip on the group.