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24 Jun 2005 |
FROM FINANCIAL TIMES In South Korea you can wake up in your Samsung Construction-built flat, eat
breakfast from your Samsung fridge while watching your Samsung TV, and then go
to work at Samsung Life Insurance. At the weekend you can take the children to Everland, Samsung's answer to
Disneyland, or go shopping at Samsung Tesco, paying with your Samsung card. In
short, there are few corners of Korean life where Samsung's tentacles do not
reach. With about 62 affiliates, the family-run conglomerate, or chaebol, accounts
for almost a quarter of the country's exports and stock market, while the $6bn
(€5bn) and more it pays in tax each year represents about 8 per cent of
government income. But Samsung's power has become a problem. Famous the world over for
itscutting-edge mobile phones and flat-screen television sets, at home it is
increasingly derided for turning the country into the 'republic of Samsung'. Lee Kun-hee, the group's chairman and son of its founder, is disparagingly
referred to as the 'emperor'. Last month anti-Samsung sentiment overflowed when Mr Lee showed up at Korea
University's new Centennial Memorial Hall, to which the group had donated
Won41.8bn ($42m), to receive an honorary doctorate. About 100 students jostled
him and blocked his entry as they protested against Samsung's policy towards
unions. The students' criticisms focused on Samsung's outlawing of unions an
incendiary tactic in a society notorious for its militant labour movement. There
has also been concern about corporate governance, which lags behind
international standards as it does at many South Korean companies. The incident has spurred Samsung into action. Recently, executives met to
consider ways of softening the anti-Samsung sentiment. The chaebol now wants to
promote itself as 'an enterprise loved by the nation'. 'Korean people generally approve very much of the critical role that Samsung
plays in the overall economy,' says Chu Woo-sik, the vice-president in charge of
investor and public relations at Samsung Electronics. 'But at the same time,
people feel that Samsung has become too dominant. We feel we should be sensitive
to people's opinions, even if it's just 1 per cent of people who feel that
way.' Samsung plans to do that by creating a friendlier image and becoming more
transparent and involved in community projects. Samsung's response to its critics suggests the public is succeeding where the
government has largely failed. President Roh Moo-hyun made curbing the chaebol's influence one of his
priorities when he came to power in 2003. But conglomerates succeeded in having
his initiatives such as class-action lawsuits for accounting fraud and limits on
cross-investment in affiliates watered down. Winning over its detractors will be a tricky task for Samsung. Koreans have a
love-hate relationship with it. They enjoy the benefits of the industrialisation
that Samsung and other chaebol have brought but still bristle at its immense
economic and political power. Industry experts doubt that the public relations offensive will work. 'This
company has built a stellar image around the world but it is not respected in
its own country. It has to question why that is,' says one of Seoul's top public
relations executives. 'I think the problem runs much deeper than they are
admitting.' Apart from outlawing unions, Samsung's corporate structure though
just as murky as those at many other conglomerates has struck a raw nerve. Mr
Lee himself owns just 1.9 per cent of Samsung Electronics, the group's flagship
company, but wields much greater influence because of a complex series of
cross-shareholdings. The Korea Development Institute calculates the Lee family exercises voting
rights in affiliates that are 17 times greater than its actual
shareholdings. These concerns are likely to intensify as the chairman prepares to pass on
the Samsung crown to his son, Lee Jae-yong, who is the biggest shareholder of
Everland Amusement Park, Samsung's de facto holding company, with 25 per cent.
Critics say the succession will underline the family's grip on power and show
how far out of step it is with global corporate governance standards. Yet for all the distaste at Samsung's methods, the irony is that South Korea
remains heavily dependent on the chaebol's success. 'It's quite paradoxical,' Samsung's Mr Chu says. 'For Korea to rise to the
level of an advanced economy with a per capita annual income of $20,000 what is
needed is a couple more Samsungs.'
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