Samsung chairman to step down after indictment

 

South Korea's most powerful businessman said on Tuesday he is stepping down after 20 years at the helm of the Samsung group, following his indictment for tax evasion and breach of trust.

 

A sombre Lee Kun-Hee made the shock announcement at a press conference called to announce reforms to the scandal-tainted group, which employs 200,000 people and last year accounted for more than 20 per cent of the nation's exports.

 

"Today, I have decided to step down from the Samsung group chairmanship," Lee, 66, told the nationally televised event.

 

"I express my deepest apologies for causing great concern to the public as a result of the special probe."

 

Special prosecutors charged Lee last Thursday following a three-month investigation into corruption allegations against the multinational. They cleared him of bribery and said he would remain free pending trial.

 

In a statement Samsung said four other executives, including vice chairman Lee Hak-Soo, would step down by the end of June. The chairman's resignation is effective immediately.

 

Samsung said it would dismantle its powerful strategic planning office, a group of some 90 officials accused of helping the chairman manage his hidden assets and illicitly transfer control of management to his son Lee Jae-Yong.

 

Jae-Yong would quit as a chief customer officer of Samsung Electronics, the group flagship, and work on developing emerging markets "in a tough environment."

 

"We want to deliver a message to shareholders that Samsung will enhance corporate transparency and step up efforts to protect their interests," vice chairman Lee Hak-Soo told reporters after reading the statement.

 

He said the chairman believes his son is not ready yet to take control of the group.

 

Asked if the chairman would still try to pull strings behind the scenes, the vice chairman said: "He means it. He will stay away from management."

 

A Samsung Electronics spokesman, James Chung, said Samsung "will be reborn as a global world-class entity."

 

But the group, which has 59 affiliates, seemed to be floundering in the wake of Lee's decision. Lee Hak-Soo said the chairman's post would remain vacant while spokesmen said affiliates would be given greater decision-making power.

 

Shares of 12 of the 15 Samsung companies listed on the main index fell on the news.

 

There are growing worries about the future "since Chairman Lee has been involved in giving the big picture, like what the future growth engines will be," said Lim Young-Jae of the state Korea Development Institute.

 

The independent probe, authorised by parliament, had investigated allegations by the group's former chief lawyer, who turned whistleblower.

 

Apart from the chairman it indicted nine other Samsung executives including the vice chairman. They were not detained pending trial.

 

The investigators said they had discovered 4.5 trillion won ($4.6 billion; Dh17 billion) of Lee Kun-Hee's hidden assets in bank and stock accounts opened under the names of executives.

 

They said Lee evaded taxes worth 112.8 billion won but there was no evidence the group had created a slush fund to bribe government officials, as the ex-lawyer had claimed.

 

The group said the 4.5 trillion won would be transferred into Lee Kun-Hee's real accounts and used for "good causes."

 

The Samsung chairman could face between five years to life in jail if found guilty. Few analysts believe he will face heavy punishment.

 

On Tuesday he told employees that 20 years ago he had pledged to make Samsung a world-class company. "I'm really sorry for not living up to the promise."

 

The special prosecutors had noted illicit transfer of managerial rights, lack of transparent book-keeping, and direct control over subsidiaries through a strategic planning office which had "little legal basis."

 

Founding families of South Korea's conglomerates often control them through cross-shareholdings, despite holding a relatively small stake.

 

"The announcement contains few measures aimed at changing corporate governance or father-to-son succession," economist Kim Sang-Jo of Hansung University told AFP.

 

Samsung said it would not immediately consider moving to a holding company structure since this could cost about 20 trillion won. (AFP)