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| Samsung Electronics Vice Chairman Lee Jae-yong arrives at Seoul High Court, Monday, for his final appeal hearing on a conviction for paying bribes to former President Park Geun-hye and her longtime confidante Choi Soon-sil, to win government support for a smooth transfer of management control from his father. / Yonhap |
By Kim Hyun-bin
The imprisonment of Lee Jae-yong, Samsung Electronics' vice chairman, has put the entire Samsung empire's future business management in limbo and is likely to put on hold any major investments and M&A decisions for the foreseeable future.
The Seoul High Court sentenced Lee to two-and-a-half years in prison Monday for paying bribes to former President Park Geun-hye and her longtime confidante, Choi Soon-sil, to win government support for the smooth transfer of management control of the country's top conglomerate from his father, late Samsung Chairman Lee Kun-hee.
Samsung has transitioned into emergency operations in the absence of the group's de facto head, and Lee's drive to create a New Samsung to recover from the COVID-19 pandemic could be on the verge of falling apart.
According to Samsung, management officials of key affiliates are set to hold emergency executive meetings to brainstorm ways to counter the crisis.
"There had been high hopes internally that Lee would get a suspended sentence, but the recent ruling comes as a shock," an industry official said. "To better counter the crisis, executives are trying to establish a Plan B and are set to hold executive meetings to discuss related issues."
Industry insiders believe Lee's absence will likely delay or halt key business decisions, such as on M&As, at a time when foreign rivals are preparing for new opportunities.
"The CEOs of each affiliate will be able to conduct daily operations without too many problems, but it will be difficult for them to make critical investments and M&A decisions," another industry official said.
There is also speculation that Lee could manage the Samsung empire from prison by receiving briefings there. However, industry watchers say there are limitations to the level of engagement the vice chairman could have from behind bars.
When Lee was first imprisoned for a year starting in February 2017, he received important briefings and took part in some decision-making on key issues.
At that time, he decided to disband the group's Future Strategy Office as well as invest 30 trillion won in the Pyeongtaek semiconductor production line through 2021.
Many believe it will be difficult to conduct large-scale investments and takeover deals for future growth.
The tech giant's last major deal came in 2016 when it acquired U.S.-based automotive products giant Harman International Industries.
Lee was first sentenced to five years in prison but was freed in 2018 after the Seoul High Court reduced the sentence to two-and-a-half years, suspended for four years.
However, the Supreme Court in 2019 overturned the previous court ruling and sent it back to the Seoul High Court for review.
