Political Crisis Engulfs Samsung, a Firm Tied to South Korea’s Success

Most large Korean companies are family-owned or family-controlled, and most are corrupt. An unusually high percentage of the heads of these companies have criminal records for financial crimes, compared to other developed economies. For decades, presidents have frequently pardoned them -- and many other CEOs would be convicted of financial crimes if the government bothered to charge them.

Presidents of South Korea have often justified their pardons of criminal CEOs by stressing the consequences for the economy. Fortunately, those excuses are less widely accepted than they used to be. Besides, it's not healthy for an economy to be heavily dependent on a small number of family-controlled firms, whether they are corrupt or not. It's true that enforcing the law against those companies may cause a short-term economic downturn, but in the long term, the economy will have a more sustainable foundation.

Incidentally, the Korean term for these large conglomerates, chaebol, is cognate with the Japanese term zaibatsu, which dominated the pre-WWII Japanese economy and shared many characteristics, including family control and political and financial corruption. Japan was better off when they were broken up. Despite appearances, the current Japanese conglomerates are better than the zaibatsu in important ways: they are rarely family-controlled, and they are less corrupt, more accountable to shareholders, and have much better corporate governance as a result.

Some reform of the economy, and less tolerance for corruption among the voters, are likely to be the best things that comes out of the impeachment of the current president.

The stranglehold that large "chaebols" (large family conglomerates) hold on the Korean economy and politics here is frightening. And it's still such an "honour" to work for them, a sign of social prestige, which makes change unlikely any time soon.

Kind of like publishing in top journals is so prestigious and career-advancing for scientists. It makes creeps like Elsevier "above the market laws", virtually undisruptible (as well as fabulously rich). It's a deeply cultural thing, with glacial inertia, not a question of technology/funding!

On a similar note, after the AlphaGo commotion, Korean government allocated some $860M to "AI innovation". I may be too cynical, but it wouldn't surprise me if the money ended up in "friendly hands", the likes of Samsung.

It doesn't help Lee Jaeyong that, unlike his ruthless father (who was somehow brutally efficient at making Samsung the most powerful company in Korea), Lee Jaeyong has the moniker of "Hand of Minus", after several of his pet projects that went nowhere.

Already some people are (somewhat jokingly) predicting that maybe his arrest would be a plus to Samsung...

That said, it was quite a bold move by prosecutors. Without the current scandal of president Park and puppetmaster Choi, I don't think they would have dared arrest Samsung's leader. (Well, the court may still say no to the arrest; we should wait and see.)

Hard to imagine Tim Cook or Sundar Pichai being arrested.

It's an even bigger deal in SK than either of those guys, where Samsung's role in the respective GDP is much higher.

It's about time Korea moves away from this oligarchical bs and embrace a true liberal democracy and market economy

When South Korea was coming out the war, it was around the poorest country on Earth. The generation who lived through the war, or who grew up right after saw their country going from being literal rubble to being a global powerhouse -- and lots of the credit is given to the dictatorship of Park Chung Hee and the particulars of the economic development program he initiated. The downside to that program, and much of it still exists today, is that is was designed to operate in a way that tolerated lots of corruption in both government and industry.

The <40 generations, who remember, at the earliest, leaving behind the military dictatorship and emergence as a fledgling democracy are far less tolerant of the excesses that the old system tolerated and want to raise expectations, bring about accountability, "deconfucionize" the national leadership (both political and industrial/commercial), and I think along with that further diversify the economy.

South Koreans are tremendously entrepreneurial, there are many many small businesses that are formed every year, and they operate in some ways in the shadows of the offerings from the major conglomerates. The government, for what it's worth, has been toying around with growing and promoting VC-like startups to help formalize the grow-and-sell approach. But there's still a tremendous disconnect and you find very few medium-sized, or even large businesses, as the conglomerates tend to either out-compete or buy up all of those companies.

From the normal person's perspective you find yourself trapped in a cycle of "making it big" and getting into a salary-man's life with a big firm (and all the downsides of that lifestyle), or doing similar jobs with less security and less pay for tiny companies. Many people don't want either choice, they want a third-way, even if they're having difficulty articulating this desire, and I think the country may be on the verge of this transformation into a more fully diversified economy.

Superficially it's hard for outsiders to see or understand this, since you can get all of the first-world fixings you would expect...except that they all seem to come from the same 4 or 5 companies and it keeps the economy perpetually trapped.

However, Korea's global position is precarious, cheaper manufacturing and goods are an hour flight away to the West (China), and higher-quality precision engineering is an hour flight away to the East (Japan). Korea has neither the money, or population to really directly compete with either and thus tries to use both the bulk of the conglomerates to act as economic gate crashers into global trade and then massive cultural subsidies and funding to push in awareness of Korean cultural properties and the network that comes with that (oh, so you like K-POP? you'll love Kimchi!). Politicians are rightly terrified of losing the relative power the conglomerates give the nation as powerful chess pieces.

The recent presidential crisis and the continuing revelations of how corrupt, and tied together the government and the conglomerates are has been a major revelation to millions of young Koreans. This crisis could become a watershed moment that could radically transform the entire political and economic landscape in the country. It's not clear at all what that could look like or if it would be beneficial for the country.

I have been convinced that NAND chips have been price-fixed for years now, similar to how the exact same companies (Samsung a big one) involved in their production price-fixed RAM chips and then LCD panels. A few years ago, there was an investigation launched into exactly this. South Korea, however, closed that investigation. Has anyone heard whether that investigation was closed as one of the 'political favors' the bribes facilitated? Given the production processes involved, the materials involved, and the sheer titanic scale of the number of products which include NAND chips, it is absurd that we do not yet have SSDs which are significantly larger, and significantly cheaper, than any mechanical hard drives.

The NYT once again disappoints. No mention of the 8 Goddess scandal?

It's almost as if the western media is deliberately avoiding the scandal, lest anyone draw parallels to western corruption.

Reading this, it would seem the President of Samsung is more important to Korea than their National President. One is mentioned in every paragraph; the other in only one, offhand.