Though the downfall of the man heading Samsung Group, South Korea’s most powerful conglomerate, may seem an ominous omen for the country’s family-run business empires, the jailing of billionaire Jay Y. Lee could end up offering some relief to chaebol dynasties.
Though the downfall of the man heading Samsung Group, South Korea’s most powerful conglomerate, may seem an ominous omen for the country’s family-run business empires, the jailing of billionaire Jay Y. Lee could end up offering some relief to chaebol dynasties.
That’s because Lee, who on Friday received one of the harshest sentences ever handed to a chaebol leader, could serve the role of sacrificial lamb. During the past year, Koreans have expressed outrage about the scandals that exposed the family-run groups, which dominate the nation’s business landscape, and their cozy ties with the government. That anger helped Moon Jae-in, an outspoken critic of the conglomerates, sweep into the presidency in May.
But Moon has yet to follow through on his anti-chaebol promises, focusing instead on more immediate concerns such as North Korea’s weapons program and U. S. President Donald Trump’s proclamations to rejig a five-year-old trade deal between the two countries. Now, the Korean president isn’ t likely to make swift reform of the conglomerates a top priority, said Celeste Arrington, an assistant professor of political science and international affairs at the George Washington University, who described the issue as “off the front burner” following the conviction.
“It will certainly ease some of the pressure, ” she said. “Moon Jae-in seems focused on the broader set of ambitious political, economic and social reforms that need to happen.” End to Collusion?
Moon’s office said it hopes the ruling will help bring an end to collusion between big business and the government. The Korea Chamber of Commerce and Industry and the Federation of Korean Industries — the lobbying groups of the chaebol — declined to comment on the verdict.
Despite some skeptics, many in Korea expressed optimism that the ruling, which broke away from the tendency by the country’s courts to hand down suspended sentences to big business, will give Moon the momentum to push ahead with his scrutiny of the chaebol.
“I think the government will push chaebol reform even harder, if economic conditions improve, » said Bruce Lee, CEO of Zebra Investment Management. «Clearly, there was a signal to the market that the chaebol has to be changed now.”
For Samsung, Lee’s five-year jail sentence threatens to prolong the vacuum atop one of the world’s biggest companies because his father, who’s been the group patriarch for three decades, remains incapacitated after suffering a heart attack in 2014. Controlled by the Lee family through a web of cross shareholdings, Samsung is Korea’s biggest conglomerate, comprised of more than 60 units selling everything from smartphones to life insurance, cargo ships and clothes.
