London Daily

Focus on the big picture.
Friday, Jun 20, 2025

Samsung patriarch’s death spurs calls to reform South Korea’s chaebol

Samsung patriarch’s death spurs calls to reform South Korea’s chaebol

The death of Lee Kun-hee has focused attention on the darker aspects of his legacy, and rekindled long-standing calls for reform of family-run conglomerates.

In the days following the death of Samsung Group leader Lee Kun-hee, condolences and praise poured in from the highest echelons of South Korea’s business and political elite.

President Moon Jae-in described Lee as an “icon” of Korean business who had displayed “audacious and innovative leadership” to turn Samsung
into a global tech powerhouse known for its semiconductors and smartphones.

Euisun Chung, chairman of the country’s largest carmaker, Hyundai Group, told reporters that Lee, who was chairman of group crown jewel Samsung Electronics, had instilled in South Korean industry the desire to “be the best”.

Yet amid the adulation, the Samsung patriarch’s death has focused attention on the darker aspects of his legacy, and with it, rekindled long-standing calls for reform of the family-run conglomerates, or chaebol, that dominate Asia’s fourth-largest economy.

Lee Nak-yon, the chairman of Moon’s governing Democratic Party and a likely future presidential contender, said that while Lee had exemplified business leadership, he had been responsible for “negatives” such as increasing the economy’s heavy reliance on the chaebol and suppressing unions.

Jeong Ho-jin, chief spokesperson for the minor left-wing Justice Party, went further, insisting South Korea had to “erase the shadow of the dark history” of cosy relations between business and politics that Lee left behind.

Although credited with powering South Korea’s rise to first-world status within a generation, the chaebol have long been a source of public ire due to their reputation for corruption and unfair business practices, and their opaque and complex leadership structures that have allowed founding families to retain control with only a small minority of shares.

“Samsung critics will make an argument that the governance issue actually has discounted the price of related stocks,” said Auh Jun Kyung, an assistant professor at Yonsei University School of Business, pointing to the rise in stock prices of a number of Samsung affiliates after Lee’s death.

“I think the circular holdings is the area that needs a change,” said Auh, referring to cross-shareholdings between affiliates that enabled the Lees to keep control as Samsung grew into a business behemoth. “Such a large gap between control and ownership exacerbates all the issues related to incentive misalignment.”


Samsung Electronics vice-chairman Jay Y. Lee, right, his mother Hong Ra-hee, centre, and his sister Lee Boo-jin, left, arrive at the funeral of Lee Kun-hee in Seoul.


Lee, who died on Sunday after spending the last six years in a coma following a heart attack, took control of his father’s business empire in the late 1980s. He was twice convicted of white-collar crimes, including embezzlement, tax evasion and bribing the president, and received a presidential pardon both times.

His son and presumed successor Jay Y. Lee, 52, known in South Korea as Lee Jae-yong, is facing two separate legal cases, including his retrial over allegations he gave bribes to a confidante of impeached former president Park Geun-hye.

A separate trial related to the merger of two Samsung units that prosecutors allege was manipulated to boost Lee’s control of the group is set to get under way in January.

The younger Lee, who along with his sisters face an inheritance tax bill of up to US$10 billion, had been widely considered de facto leader of the group since his father became incapacitated in 2014.

“The most effective reform would be the court ruling that would put Jay Y. Lee in jail, and block him from serving as an executive of Samsung Electronics,” said Woochan Kim, a professor at Korea University Business School in Seoul.

“That would give a strong signal to the rest of the business community that business executives should no longer try to give bribes or manipulate stock prices to benefit themselves at the expense of minority shareholders.”

Like successive left-leaning leaders before him, Moon campaigned on sweeping chaebol reform, once including the conglomerates among a list of “deep-rooted evils” plaguing South Korea society.


A Samsung flag flies at half-mast outside the company's Seocho building in Seoul on October 28.


But after taking some steps to rein them in – such as appointing Kim So-jang, a veteran corporate activist known as the “chaebol sniper”, to lead the Fair Trade Commission – Moon has been accused by activists and unions of abandoning his pledges to secure industry support for his economic plans and rapprochement with North Korea.

Eugene Kim, managing partner of advisory firm Egon Zehnder’s Seoul office, said successive South Korean administrations including Moon’s had blinked on structural reform due to fears of the economic fallout.

“They have always been scared when you have a slumping economy or a difficult marketplace and people have been blaming the government for the bad economic situation,” said Kim, adding that the prosecution of individual executives did not address the deeper problem of chaebol leadership structures. “You either change or you don’t change.”

The top 10 chaebol generated revenues that amounted to nearly 50 per cent of South Korea’s GDP in 2017, according to corporate website CEO Score. Samsung Group – whose businesses span electronics, insurance, construction, shipbuilding, and arms – has been estimated to account for 20 per cent of the country’s US$1.5 trillion economy.

In an apparent signal of his willingness to turn his attention back toward the chaebol, Moon on Wednesday called for bipartisan support for a number of “fair economy” bills that would boost shareholder rights and management oversight, and increase the bargaining power of franchisees.

Samsung, too, has attempted to read the public mood.

In May, Jay Y. Lee made a rare public apology over the controversy surrounding his succession, and pledged not to pass on control of the company to his children when the time came.

“That is an admission of the limitations of the chaebol system – the chaebol chairman is publicly acknowledging that this system is not going to last forever,” said Chang Sea-Jin, a South Korean-born professor at National University of Singapore Business School. “If the government strictly enforces this inheritance tax system, the chaebol will go away in 10 or 20 years.”

Although it is “very easy to break the system”, it would take time to build something better, Chang added.

Many, though, do not see real change happening under the initiative of the government or the chaebol themselves.

“The Korean government already had the opportunity to clean up the chaebol,” said Geoffrey Cain, author of Samsung Rising: The Inside Story of the South Korean Giant That Set Out to Beat Apple and Conquer Tech.

“If anything, we’ll see the opposite. Jay Lee is under pressure to get enough shares and pay the inheritance tax, so we could see more shady shareholding deals in the coming months that would solidify his control at the expense of shareholders.”

Kim, the Korea University Business School professor, was blunt in his assessment of the likelihood of Moon leading major reform.

“If he does, that would be a miracle,” he said.

Newsletter

Related Articles

0:00
0:00
Close
16 Billion Login Credentials Leaked in Unprecedented Cybersecurity Breach
Senate hearing on who was 'really running' Biden White House kicks off
Iranian Military Officers Reportedly Seek Contact with Reza Pahlavi, Signal Intent to Defect
FBI and Senate Investigate Allegations of Chinese Plot to Influence the 2020 Election in Biden’s Favor Using Fake U.S. Driver’s Licenses
Vietnam Emerges as Luxury Yacht Destination for Ultra‑Rich
Plans to Sell Dutch Embassy in Bangkok Face Local Opposition
China's Iranian Oil Imports Face Disruption Amid Escalating Middle East Tensions
Trump's $5 Million 'Trump Card' Visa Program Draws Nearly 70,000 Applicants
DGCA Finds No Major Safety Concerns in Air India's Boeing 787 Fleet
Airlines Reroute Flights Amid Expanding Middle East Conflict Zones
Elon Musk's xAI Seeks $9.3 Billion in Funding Amid AI Expansion
Trump Demands Iran's Unconditional Surrender Amid Escalating Conflict
Israeli Airstrike Targets Iranian State TV in Central Tehran
President Trump is leaving the G7 summit early and has ordered the National Security Council to the Situation Room
Taiwan Imposes Export Ban on Chips to Huawei and SMIC
Israel has just announced plans to strike Tehran again, and in response, Trump has urged people to evacuate
Netanyahu Signals Potential Regime Change in Iran
Juncker Criticizes EU Inaction on Trump Tariffs
EU Proposes Ban on New Russian Gas Contracts
Analysts Warn Iran May Resort to Unconventional Warfare
Iranian Regime Faces Existential Threat Amid Conflict
Energy Infrastructure Becomes War Zone in Middle East
UK Home Secretary Apologizes Over Child Grooming Failures
Trump Organization Launches 5G Mobile Network and Golden Handset
Towcester Hosts 2025 English Greyhound Derby Amid Industry Scrutiny
Gary Oldman and David Beckham Knighted in King's Birthday Honours
Over 30,000 Lightning Strikes Recorded Across UK During Overnight Storms
Princess of Wales Returns to Public Duties at Trooping the Colour
Red Arrows Use Sustainable Fuel in Historic Trooping the Colour Flypast
Former Welsh First Minister Addresses Unionist Concerns Over Irish Language
Iran Signals Openness to Nuclear Negotiations Amid Ongoing Regional Tensions
France Bars Israeli Arms Companies from Paris Defense Expo
King Charles Leads Tribute to Air India Crash Victims at Trooping the Colour
Jack Pitchford Embarks on 200-Mile Walk to Support Stem Cell Charity
Surrey Hikers Take on Challenge of Climbing 11 Peaks in a Single Day
UK Deploys RAF Jets to Middle East Amid Israel-Iran Tensions
Two Skydivers Die in 'Tragic Accident' at Devon Airfield
Sainsbury's and Morrisons Accused of Displaying Prohibited Tobacco Ads
UK Launches National Inquiry into Grooming Gangs
Families Seek Closure After Air India Crash
Gold Emerges as Global Safe Haven Amid Uncertainty
Trump Reports $57 Million Earnings from Crypto Venture
Trump's Military Parade Sparks Concerns Over Authoritarianism
Nationwide 'No Kings' Protests Challenge Trump's Leadership
UK Deploys Jets to Middle East Amid Rising Tensions
Trump's Anti-War Stance Tested Amid Israel-Iran Conflict
Germany Holds First Veterans Celebration Since WWII
U.S. Health Secretary Dismisses CDC Vaccine Advisory Committee
Minnesota Lawmaker Melissa Hortman and Husband Killed in Targeted Attack; Senator John Hoffman and Wife Injured
Exiled Iranian Prince Reza Pahlavi Urges Overthrow of Khamenei Regime
×