hankyoreh

director of Solidarity for Economic Reform

By Lee Hyung-sub, staff reporter

“Why is it that, despite Samsung’s remarkable management results, there remains an equal mixture of light and darkness in the company? Why is it that, even as Samsung makes such smart business decisions, its decisions about ownership structure are so hard to understand? Lee Jae-yong [vice-chairman of Samsung Electronics] needs to appear in public and let others see him talking with various members of the staff. That is how he can demonstrate his management ability.”

True, such complaints are often made by people in Korea who are critical of Samsung.

However there was something special about these comments, which were made in a 39th floor meeting room at Samsung headquarters in the Seocho neighborhood of Seoul on July 17.

The speaker was Kim Sang-jo, director of Solidarity for Economic Reform (and a professor at Hansung University), who is the best-known advocate of chaebol reform in Korea. The audience was a group of presidents of companies in the Samsung group.

Kim Sang-jo gave a lecture at the weekly Wednesday meeting of Samsung group presidents. During the lecture, he landed a direct blow on Samsung’s management structure, which is the group’s Achilles heel.

“Samsung’s pride for its accomplishments seems to have become so extreme that it has led to arrogance. Samsung appears to believe that it is exceptional and exists outside of Korean society,” Kim said.

“It looks like change will be impossible to achieve during the generation of Lee Kun-hee [chairman of Samsung]. But as we move into the Lee Jae-yong generation, Samsung has to change,” he said.

Kim’s lecture was titled “Economic Democratization and Samsung.” The part that got the most attention was the final section of the lecture, which he called “the future of Samsung.” Here, Kim emphasized the point that Samsung, and Lee Jae-yong, need to change by embracing an open society.

So how did the Samsung presidents respond to the lecture? “It was not the sort of mood in which a lively debate could take place,” Kim said. “Overall, they listened attentively.”

In the middle of the lecture, Kim said, “the economic democratization [that we have seen so far] isn’t even half of what I was expecting.” In response, Chung Ki-young, President and CEO of the Samsung Economic Research Institute, shot back that “companies find these measures to be extremely tough.” But most presidents indicated that they agreed that the world has changed and that companies will have to change, too.

There are also some who think that the very fact that Samsung invited Kim to give a lecture should be viewed as a sign that the group is trying to change.

When Kim argued in a general meeting of Samsung Electronics shareholders in Feb. 2004 that disciplinary action should be taken against Lee Kun-hee for contributing illegal funds to the election, he was dragged out by Samsung’s security. He has also reported Lee Kun-hee to the prosecutors on several occasions.

“We invited Kim to give a lecture because we are all in agreement about the need to hear various voices in society,” said Lee In-yong, president of Samsung Future Strategy Office.

Other indications that change is taking place at Samsung were seen last year through the Samsung presidents’ meeting. Throughout 2012, a number of figures who are regarded as some of the leading progressive thinkers in Korean society including Kim Ho-gi, professor at Yonsei University, and Cambridge University professor Chang Ha-joon were invited to give lectures at the meeting.

It was about two months ago that Kim accepted Samsung’s invitation to appear as a lecturer.

But after that, he reported Lee Kun-hee to the prosecutors for breach of trust in connection with Samsung C&T’s sale of shares in Kazakhmys, a copper mining company in Kazakhstan, for an absurdly low price, causing the company 140 billion won (US$125.16 million) in losses.

He also announced that he would be filing a stockholder derivative suit against six construction companies, including Samsung C&T, on charges of collusion in the Four Major Rivers Project.

“I thought that they might not allow me to give the lecture, but in fact they went ahead with it,” Kim said.

When asked whether Samsung is changing, Kim said, “The world has changed, and the younger employees at Samsung are changing. It is a situation where change is unavoidable. However, it is Samsung that will choose which direction that change will go.”

Of course, Kim was also concerned that Samsung would use the lecture as a superficial gesture to create the impression to the outside world that it was changing. But he said that he agreed to do the lecture, since he couldn’t think of anyone else who would be able to freely talk like this in front of the presidents of Samsung group.

Will Samsung really be able to change? When a Hankyoreh reporter asked Kim whether Samsung will put what was said in the lecture into practice, he avoided giving a direct answer.

Please direct questions or comments to [english@hani.co.kr]