Samsung heir apologizes over succession controversy, vows to scrap ‘no labor union’ policy

May 6, 2020

Lee Jae-yong, the heir of South Korea’s top conglomerate Samsung Group, made a rare public apology Wednesday over controversies related to his succession and vowed to scrap the group’s “no labor union” policy.

Lee, the eldest son of bedridden Samsung Group chief Lee Kun-hee, also said he will not hand over managerial power to his scions.

“Samsung has not strictly complied with laws and ethics, and also has been inadequate in communicating with society,” Lee said during a press conference at the company’s headquarters in Seoul.

“All of these came from our inadequacy, and it’s my fault. I apologize,” he said.

This is the first time that Lee has made a public apology since June 2015, when he did so over a Samsung hospital’s mishandling of the Middle East Respiratory Syndrome (MERS).

Lee’s latest action comes after the group’s independent compliance committee in March urged him to make a public apology and come up with measures that can improve Samsung’s compliance culture in three areas: managerial succession, labor union and communication with civil society.

Lee, 51, was originally asked to respond to the committee’s advice by April 10, but due to the novel coronavirus outbreak, Samsung had requested to push back the deadline by a month.

Samsung Electronics Vice Chairman Lee Jae-yong, the heir of Samsung Group, bows during his press conference at the company's office building in Seoul on May 6, 2020. (Yonhap)
This photo taken on Jan. 30, 2020, shows the corporate logo of Samsung Group at its office building in Seoul. (Yonhap)

Samsung Electronics Vice Chairman Lee Jae-yong, the heir of Samsung Group, bows during his press conference at the company’s office building in Seoul on May 6, 2020. (Yonhap)

The succession process in Samsung has involved a bribery case and a controversial merger of two of its affiliates — Samsung C&T Corp. and Cheil Industries Inc. — in 2015. Legal battles on both issues are still under way.

Lee was indicted in 2017 for giving bribes to a longtime friend of then President Park Geun-hye as he sought backing for his plan to secure the throne of South Korea’s biggest conglomerate.

He was initially sentenced to five years in prison in 2017 but was freed a year later after the Seoul High Court reduced the sentence to 2 1/2 years, suspended for four years, dismissing most of the bribery charges against him.

The Supreme Court, however, last year overturned the previous court ruling and sent it back to the Seoul High Court for a review.

Prosecutors believe Samsung’s top management may have intentionally lowered the value of Samsung C&T prior to its merger with Cheil Industries in 2015 to help benefit Lee.

“All of the problems basically started from this succession issue,” Lee said. “From now on, I will make sure that no controversy happens again regarding the succession issue.”

Lee, vice chairman of Samsung Electronics Co., added he does not plan to pass on managerial rights to his children.

“I had it in my mind for a long time, but I was afraid to talk to others,” he said. “I thought it was irresponsible to mention about succession after me since I have yet to be evaluated well.”

Regarding labor union issues, Lee apologized to those who were hurt by the group’s “no-labor union” policy.

“From now on, I will make sure that Samsung no longer pursues no labor union management,” he said. “We will strictly comply with labor related laws and will guarantee three fundamental labor rights.”

Samsung had disallowed labor unions for decades, claiming that its policy actually leads the conglomerate to better ensure its workers’ rights and welfare.

In December, the group saw former Samsung Electronics board chairman Lee Sang-hoon sentenced to 18 months in prison for sabotaging a labor union.

In regard to communication with civil society, Lee vowed to listen to various voices from people, emphasizing that compliance will be Samsung’s key culture.

Lee also shared his vision with Samsung, saying that the group aims to make society better by using its technology prowess and pursuing new business opportunities.

His apology over controversial succession plan came as the tech giant is suffering a slump in its key business areas such as smartphones.

The group’s crown jewel, Samsung Electronics, saw its sales rise 5.61 percent on-year to 55.3 trillion won (US$45.2 billion), while its operating income increased 3.43 percent on-year to 6.4 trillion won in the first quarter of the year.

However, compared to the company’s heyday in 2018, when it made at least 10 trillion won in operating profit, its quarterly performance was mediocre.

“Risk is always next to us, and you cannot predict the future,” he said.

Lee said he will now focus on bringing in talented individuals who can make Samsung better.

“Those talented people should work with responsibility and must lead our businesses from more important positions than me,” he said. “If I can fully carry out my role, then Samsung can remain as Samsung.”

Lee also guaranteed that Samsung’s compliance committee, led by former Supreme Court Justice Kim Ji-hyung, will act independently even if court trials related to his cases end. The committee was officially launched in February.

Meanwhile, the Federation of Korean Trade Unions, one of the major umbrella unions in the country, released a statement following Lee’s apology, saying that the conglomerate should focus on matching its words with action regarding its promise on its labor union policy.