March 28, 2017 3:00 pm JST

Chaebol play both villain and hero in South Korea's tale

Samsung's woes reveal complex public attitude toward family-run empires

KENICHI YAMADA, Nikkei staff writer

SEOUL -- The jailing of the Samsung group's de facto leader as part of the scandal over South Korea's impeached president highlights the public's love-hate relationship with the family-run conglomerates that dominate the country's business scene.

Samsung Electronics Vice Chairman Lee Jae-yong was conspicuously absent from the company's shareholders meeting Friday, about a month after his arrest on allegations of bribing former South Korean President Park Geun-hye and her friend, Choi Soon-sil.

Lee was made director in October, and he was expected at this year's meeting to set out a new strategy for South Korea's largest chaebol, or conglomerate, as its third-generation heir both in name and in fact. Instead, another official ended up using the event to apologize for the incident.

Lee told other Samsung officials from the Seoul Detention Center that there should be no gaps in management. Aside from seeing lawyers, he can leave his small, solitary cell only for one meeting with visitors and 30 minutes of exercise a day. Lee is given simple meals that cost no more than a dollar or so, and is required to wash the dirty dishes in his own sink. The March 16 visit by his mother, Hong Ra-hee, was the first time he had seen family since the arrest.

Many think Lee deserves his plight. "The people hate chaebol," said one official at a major conglomerate. The owner families of these businesses are living proof of how wealth can be concentrated into the hands of a few.

It's the founding families, not the conglomerates themselves, that should be blamed, said Ahn Cheol-soo, a former People's Party co-chief and current presidential candidate.

Yet Samsung and other conglomerates also led South Korea's national growth. In 2009, then-President Lee Myung-bak pardoned former Samsung Chairman Lee Kun-hee, who had received a three-year suspended sentence for breach of trust. The move was intended to clear the globally connected businessman's name so he could lead the campaign for South Korea to host the 2018 Winter Olympics. Few objected, and the entire country rejoiced when its city of Pyeongchang won the bid. Lee Kun-hee, who is the father of Lee Jae-yong, has since been reinstated as chairman.

"A time will come when the next administration will count on Vice Chairman Lee [Jae-yong] as well," one Samsung employee in his 40s said.

"We might complain, but we all think it would be devastating if Samsung went under," a worker at a smaller conglomerate said.

South Korea's business empires have been considered both villains and the key to the country's fate. The Park scandal has only proven how deeply these conflicted feelings run.

Nikkei staff writers Hiroshi Minegishi and Koichi Kato in Seoul contributed to this story.

Asia300

Samsung Electronics Co., Ltd.

South Korea

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