Samsung’s Heir Apparent Makes Shaky Debut as Korea’s Top Boss

  • Lee grilled by lawmakers in parliamentary investigation
  • Hearing probes business groups’ involvement in Park scandal

Jay Y. Lee, co-vice chairman of Samsung Electronics Co., center, speaks during a parliamentary hearing at the National Assembly in Seoul, on Dec. 6, 2016.

Photographer: SeongJoon Cho/Bloomberg

As the leader of Samsung Group stuttered and stalled his way through a parliamentary corruption hearing on Tuesday, an exasperated lawmaker rounded on him and quipped that, if this were a job interview at his company, the head of Asia’s biggest technology giant would struggle getting hired.

“I don’t think you would get a good score if you answered this way,” opposition politician Kim Han-jung told Jay Y. Lee, de-facto head of Samsung Group. “You would fail.”

Lee had been summoned with eight other heads of South Korea’s giant, family-run chaebol conglomerates to answer questions about whether they were involved in a corruption scandal that could bring down the country’s President Park Geun-hye. Together, the nine tycoons control companies with combined annual sales of more than $800 billion.

When the proceedings began at the National Assembly, lawmakers fired questions at Lee, vice chairman of Samsung Electronics Co. and the son of 74-year-old Group Chairman Lee Kun-hee. At 48, Jay Y. Lee was the youngest of the leaders summoned, whose average age is 66. He’s run Samsung since his father suffered a heart attack in 2014.

“I came here with a heavy heart,” Lee began. “I will make sure never to get involved in such unfortunate situations again.”

Millions of Koreans watched the live broadcast of the National Assembly’s special investigation on their TVs and smartphones, as Lee gave his first major unscripted public appearance representing the nation’s biggest company. After a calamitous year, marked by a scandal over its exploding flagship phone, the hearing was a chance to reassure the company’s employees and the public that the corporation was in good hands, with strong, confident leadership.

Nervous Appearance

Groomed all his life to run Samsung Group, Lee appeared nervous and hesitant under the barrage of questions from 18 lawmakers. Several times he avoided answering the question, saying he didn’t know, or couldn’t remember.

“I think he should’ve at least been aware of the correct facts,” said Chung Sun-sup, chief executive officer of corporate research firm Chaebul.com. “If he is like this when he runs the company, then that is very concerning.’’

Prosecutors have said President Park colluded in a scheme to pressure the chaebols to donate millions of dollars to foundations controlled by her friend Choi Soon-sil. Choi, whose lawyer has denied most of the allegations, has been indicted for attempted coercion and abuse of authority.

Park faces a parliamentary impeachment vote on Friday and has apologized to the nation in televised speeches. On Tuesday, she offered to resign in April. None of the nine chaebol groups have been legally charged with wrongdoing.

During Tuesday’s daylong hearing, Lee apologized for the Galaxy Note 7 phone debacle and avoided directly answering numerous questions on when he knew about the role of Park’s friend Choi, or who told him about her. Opposition lawmakers yelled at Lee to give a straight answer.

The executive was grilled on a controversial merger between Samsung C&T Corp. and Cheil Industries Inc. last year that was backed by the state-run National Pension Service, the biggest outside shareholder of Samsung Electronics. Civic groups and individual investors had questioned the merger and the NPS’s reasons for supporting the deal.

One lawmaker asked if Samsung was funding Choi’s daughter and lobbying the pension fund to curry favor so that the merger went smoothly.

“We did not pay for favors,” Lee responded.

The committee heard evidence from Chu Jin-hyung, former chief executive officer of Hanwha Investment & Securities, which he said was the only brokerage to voice opposition to the merger. He said he was told by the head of the Hanwha group’s planning division not to write a negative report on the merger. When he did so, the same official pressured him to step down, Chu told the hearing. A Hanwha official declined to comment.

‘Like Gangsters’

“Like any Korean conglomerate, they operate basically like they are gangsters,” Chu told the hearing, referring to the business groups in general. “Whoever goes against their wishes they punish that person to make sure others follow their orders.”

Lee’s answers were often apologetic or remorseful.

“We could have done things in a more transparent manner and explained better,” Lee said. “It’s all my shortcomings. Please blame me.”

He told Tuesday’s hearing he’s willing to dismantle the central office that coordinates Samsung’s many businesses, a structure common among chaebols that has long been criticized by activists who say it serves the interests of founding families. He also said he would step aside as group leader if someone better emerges.

Shareholders and customers will be asking “how come somebody like him is able to run a global company?” said Park Ju-gun, president of corporate watchdog CEOScore in Seoul. “His answers such as ‘I don’t know’ and ‘I don’t remember’ are all legal phrases and the result of legal training. Even so, the impact on the image of the company will be as big as the Galaxy Note 7 debacle.”

The hearing comes at the end of a tumultuous year for South Korea, with Samsung’s exploding phones, the collapse of Hanjin Shipping Co. and investigations into the conduct of the head of the Lotte retail group, on top of the presidential scandal. On Saturday, hundreds of thousands of South Korean protesters marched to Park’s office, chanting “step down now -- arrest her!” and “chaebols are accomplices.”

Lawmakers questioned chaebol leaders over allegations that they were also pressured by the Federation of Korean Industries to provide funds to Choi’s foundations. Officials have searched the headquarters of Lotte Group and SK Group, seeking evidence of whether they donated money to foundations controlled by Choi in return for duty-free business licenses.

Lotte Group Chairman Shin Dong-bin, 61, denied that Lotte provided funds to the foundation to gain favor. SK Group’s Chey Tae-won was among four chaebol leaders, including Lee, who said they are withdrawing from the Federation.

The committee hearings opened Monday with evidence given by the presidential secretary’s office and the finance ministry. Individuals including Choi’s family and former presidential secretaries were summoned to appear on Wednesday.

— With assistance by Sohee Kim

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