Samsung Chief Arrested But Will It Matter?

The Korean government shocked the tech world last week by arresting the son of the country’s wealthiest family, who also happens to be the leader of Samsung. The charges alleged include a corruption scandal that has ties to the highest political office. As with all scandals including the powerful and the famous, the country was glued to their TVs and smartphones for any news. But the arrest was still a surprise.

Prosecutors are saying Lee Jae-Yong, 48, vice-chairman and heir apparent at Samsung Electronics, sent bribes of up to $36 million to Korean President Park Geun-Hye along with some of the President’s close colleagues. The bribes are said to have a direct business connection, hoping to gain government favor for a proposed merger of two Samsung companies that would allow the massive tech company to control even more of the market.

At this point, the arrest created both an internal power structure issue as well as a public relations black eye. That said, market watchers don’t seem to think it will hurt the company’s sales very much.

Speaking to the Associated Press, Park Sang-In, a professor at Seoul National University, said, “What would affect its businesses are the Galaxy phone’s success, the performance of the semiconductor sector and how fast Chinese rivals are catching up, not whether Lee Jae-Yong is arrested or not…”

As evidence for this claim, the professor and others who share that analysis have cited the fact that the CEO’s of Hyundai Motors and SK Group have been jailed but managed to run their companies from prison. That may very well be what happens in this case too.

Samsung remains the world’s largest manufacturer of mobile phones, TVs and computer-memory chips, a status that will not change simply because the company’s boss is in legal trouble. After all, Samsung managed to turn a tidy profit even after having to recall millions of Galaxy handsets due to the flaming phone scandal, then had to recall or repair a number of washing machines due to mechanical issues.

The company expects sales to continue on pace if not better, as the company continues to put distance between its brand and a difficult PR time in 2016. That’s not to say it will be business as usual. Company officials have said they expect to put bigger decisions on hold. Anything long-term, even the proposed merger that started all this trouble in the first place, may be put on hold as the company circles the wagons to, once again, address another public relations problem.

Leave a Reply