Samsung chairman Jay Y Lee has been sentenced to five years in jail for his part in a bribery and cronyism scandal that rocked South Korea. The acting chairman and heir to the technology giant has been found guilty of offering millions in bribes in order to garner support for disgraced ex-South Korean president Park Geun-hye. Removed from office, Park herself faces a possible life sentence at his own trial later this year.
South Korea’s third-richest man, Lee is expected to appeal the decision and maintains his innocence. However, things could have been worse for the tycoon as prosecutors campaigned for a 12-year sentence.
Lee was found guilty of approving donations to Park’s friend, Choi Soon-sil, in return for securing government support for the contentious merger of two Samsung affiliates that would strengthen his control over the group. Since his arrest in February, Lee has insisted the payments were made to Samsung without his knowledge, and with no expectation of favours from the Park administration. In total Lee was found guilty of sanctioning £30 million in bribes to four entities controlled by Choi.
What this all means for Samsung remains to be seen. Investors are concerned that Lee’s enforced absence will create a leadership vacuum – which has dozens of affiliates and assets of $322bn – and harm its ability to make key strategic decisions.
In May, following Lee’s arrest, the corporation carried out an executive reshuffle to account for Lee’s absence. The reshuffle, which sees a new head of mobile marketing and a new China chief take up their posts, has been designed to prevent a decline in Samsung’s momentum. Analysts do not see the reshuffle as a permanent move and instead believe it is a stop-gap measure. "It appears that Samsung made the changes at a smallest possible scale in order to ensure that its business operations keep running," said Park Ju-gun, head of corporate analysis firm CEO Score.
In July, Samsung announced record £9.3 billion quarterly profits and experts predicted that it would displace Intel as the leading chipmaker by the end of the year.