Samsung is in search of a new leader after Jay Y. Lee, grandson of Samsung’s founder, was convicted of bribing South Korea’s President to approve a controversial merger between two Samsung affiliates. Many thought that the proposed merger, which had been heavily criticized by independent analysts and investors, would not receive the legally-required approval from then-President Park Geun-hye’s administration. Lee allegedly bribed President and people close to her, to the tune of $38 million, for her support. When this corruption was exposed, President Park resigned and Lee was prosecuted and ultimately convicted.
Some hope that these dramatic developments portend more far-reaching changes in South Korea’s economy—in particular, the destruction of the chaebols (literally “wealth clans”), the multinational conglomerates in which leadership is passed from person to person within a family. Many credit chaebols with the successful post-World War II transformation of South Korea’s agrarian economy into an international economic powerhouse, but others criticize chaebols on a number of grounds, including the claim that they concentrate power and wealth in the hands of a small family minority, pay low dividends to ordinary investors, and facilitate the sort of grand corruption exposed in the Samsung affair.
After President Park resigned in disgrace, she was replaced by President Moon Jae-in, promised to put an end to chaebols altogether. Alas, this is unlikely. Indeed, it’s looking increasingly like Samsung’s recent scandal will not have a lasting effect on chaebols, or even on Samsung’s long-term profitability. Continue reading