What Will Lee’s Sentencing Mean for Samsung?


So far, Samsung has weathered a string of serious PR disasters very well. The company fought through the “exploding phone” fiasco just as another, deeper, PR problem was beginning. The first family of Samsung was under investigation for corruption. That case was tied to the now-former president of South Korea, Park Geun-hye, also on the hot seat for corruption.

Now, that president has been forced out, and the leader of Samsung, Lee Jae-yong, has been found guilty of corruption and been sentenced to five years in prison for bribery, embezzlement, and perjury.

The case is a classic example of government and business corruption. Lee was suspected of donating money to a slush fund connected with Park, in exchange for government approval of a then-controversial business merger. The merger in question was approved, and someone – actually a lot of people – smelled a rat.

When the news hit the press, headlines exploded on both sides of the Pacific. Was this all much ado about nothing, or did the head of one of the wealthiest and most powerful families on the planet really have the president of South Korea on the payroll? The court said “yes,” at least to a point.

Samsung is still shouting “NO!” Shortly after the verdict, the company released a statement denouncing the decision and insisting Lee will be acquitted on appeal.

So, does this mean Samsung will sell fewer phones? Probably not. If they can make it through exploding phones, dealing with allegations of corruption should be a relative cakewalk as far as selling products is concerned. In fact, Samsung is riding high when it comes to sales. The company has a big win with the Galaxy S8, recently celebrated its best quarter ever, and just edged Apple as the most profitable tech company in the world.

So, on that front, Samsung is doing fine. But there are other considerations. Investors, big businesses, and many nations don’t like dealing with companies that have a stigma of corruption surrounding them. Long-term, if Samsung doesn’t correct its image on this front, there could be issues down the road. A lot of investors are reticent to trust dynastic businesses. Sure, a founder may have the “right stuff,” but that doesn’t mean his grandkids do. They may want different leadership … and this kind of scandal could be the foothold large investors need to force the issue if they choose to do so.

It’s possible all of this will just go away on appeal, but it’s not likely. Sooner or later, Samsung will have to deal with the notion that, at least maybe, their leadership is suspect.

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