Samsung Electronics to tighten donation guidelines; group executives offer to resign

Choi Gee-sung, chief executive of South Korea's Samsung Electronics, speaks during an annual shareholders' meeting at the company headquarters in Seoul, South Korea
Choi Gee-sung, chief executive of South Korea’s Samsung Electronics, speaks during an annual shareholders’ meeting at the company headquarters in Seoul, South Korea

Tech giant Samsung Electronics is tightening board oversight on donations while two senior Samsung Group executives reportedly offered to resign, as the conglomerate struggles with the fallout from a graft scandal that led to its leader’s arrest.

Samsung Electronics said on Friday its board of directors will now vote on any financial support to third parties worth 1 billion won (an equivalent of $886,210.56) or more and disclose any such payments publicly. Previously, only payments of 680 billion won or more were subject to board approval.

“This move improves transparency in financial aid and appropriation of social corporate social responsibility funds, and strengthens compliance management,” the company said in a statement.

The flagship of South Korea’s top conglomerate Samsung Group has been at the center of an influence-peddling scandal that led South Korea’s parliament to impeach President Park Geun-hye in December.

Jay Y. Lee, leader of Samsung Group and Samsung Electronics’ vice chairman, was arrested last week after being named a suspect by the South Korean special prosecutor’s office. Lee is accused of pledging 43 billion won in bribes to a company and organizations backed by President Park Geun-hye’s confidant, Choi Soon-sil, to curry favor.

Though Samsung Group and Lee have denied paying bribes to Park or seeking improper favors, the conglomerate has pledged to take steps to improve transparency amid accusations and criticisms that Samsung used its financial might to game the system in its favor.

Lee, who is arguing that he was coerced into making the payments, told lawmakers during a December hearing that Samsung Group would take measures to avoid making improper payments in the future.

Samsung also said on Friday it was unable to nominate a new outside director for vote at the March 24 annual shareholder meeting due to uncertain circumstances. The firm had in November promised to nominate at least one new board member with “global C-suite experience” as part of its efforts to improve corporate governance.

Separately, South Korea’s Yonhap news agency reported later on Friday that Samsung Group Vice Chairman Choi Gee-sung and President Chang Choong-ki have offered to resign to take responsibility for the graft scandal. Choi and Chang are also suspects in the special prosecutor’s investigation.

A potential exit by Choi adds to questions about how the smartphones-to-biopharmaceuticals giant will operate in Lee’s absence.

Samsung insiders and former executives believed that after Lee’s arrest Choi, the No.2 at Samsung Group and mentor to the 48-year-old Lee, would likely manage group-level affairs while professional managers continue running the various affiliates.

Choi’s exit, if confirmed, would signal a change of guard and raise the possibility that heads of the various affiliates are given more autonomy to make business decisions, analysts said on Friday.

Samsung shares ended down 2.5 percent on Friday, but are still up 6 percent so far this year.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s