Will South Korea’s latest corruption scandal be enough to create true reform?
Samsung Group chief Lee Jae-yong arrives at the office of the independent counsel team in Seoul
South Korean President Park Geun-Hye was led away in handcuffs last week in the wake of dizzying corruption scandal that led to her impeachment and arrest.
The complicated and at times bizarre scandal also swept up Lee Jae-yong, the de facto head of Samsung, in its wake. Just this week former President Park Geun Hye was arrested at three in the morning from her home and escorted to prison after being accused of accepting bribes from some of South Korea’s leading businesses, Samsung included.
Lee Jae-yong, son of the current Samsung chairman Lee Kun-Hee and grandson of Samsung founder Lee Byung-chul, has effectively been leader of Samsung since 2014 when his father suffered a heart attack. He is ranked as the 40th most powerful man in the world by Forbes, but in February he was arrested for his role in bribing former President Park.
Samsung is accused of paying USD36.4 million in bribes to Choi Soon-il, a friend of Park’s who was said to have significant sway over her political decisions. Samsung reportedly got political favors in exchange for these bribes, including government backing for a merger that allowed Lee to take control of the conglomerate. If convicted he could face up to 20 years in prison.
This is not the first time that a top Samsung executive has faced jail time. His father was convicted of evading taxes to the tune of tens of millions of dollars and embezzling corporate funds in 2008. The case was seen as a landmark in the struggle against corruption in the country at the time.
But the victory was short lived; at the end of 2009 then President Lee Myung-bak pardoned Lee Kun-Hee so that he could serve on South Korea’s Olympics Committee. The case showed observers how top executives in South Korea had effective immunity from the courts.
As Hansung University Professor Kim Sang-Jo told the New York Times that same year, “the latest pardon reconfirms a common saying in South Korea that Samsung lies above the law and the government.”
The question now is, in the wake of the complete collapse of Park’s government and mass protest of the corrupt practices it represented is that saying still true?
To answer that question one must first take a step back and look at South Korea’s recent history. Samsung is part of a small group of family-owned business elites known as Chaebol in South Korea. These businesses also include LG, Lotte, and Hyundai.
Chaebol culture stems all the way back to the 1980s and 1990s when South Korea was in dire economic straits. Park’s father, who was president at the time, channeled government funds into a number of family-run businesses. The government gave these businesses support and freedom and in return they gave significant donations to politicians.
South Korea’s economic rise has allowed this culture to thrive without many challenges. Looking at South Korea now, it is hard to believe that up until the 1980s the country was among the poorest in the world. Much of that is due to the incredible success of Samsung. South Korea today leads in technology, has the fastest internet in the world, and the products of Samsung represent Apple’s only significant competition.
Chaebol culture has thrived since then. In 2009, Lee’s presidential pardon was seen as proof that for a select few in South Korea accountability was not a word they would have to worry about.
But Lee did not face the same public backlash brought about by Park’s indiscretions. The question today is whether public anger will be enough to force politicians to rein in the Chaebol families. Almost a million people protested for days once Park Geun-Hye’s scandals came to light. Her removal from office came after months of public pressure. Taken without context the situation seems hopeful for South Korea; the disgraced president and corrupt business leader have been brought to justice. The public backlash against corruption and Chaebol culture is an opportunity for South Korean politicians seeking to prove themselves through reform.
On the other hand, this is just the beginning of the case against Lee, and if South Korean history has shown anything it is that corruption can resist attempts to root it out.
Park’s father also faced mass public protests in the 1980s which eventually led to him leaving office. Despite this, Chaebol culture remained, and though Lee’s father was convicted and set to go to prison, he managed to avoid it.
South Korea is in a delicate position right now. Relations with China soured after it agreed to deploy a US defense missile system in response to North Korean threats. China began boycotting several of South Korea’s major brands in response—a blow to a country that relies primarily on exports. Unemployment is on the rise in South Korea, and young people complain of an atmosphere of intense pressure and competition for work. It is a difficult atmosphere in which to pursue reforms that would upset one of South Korea’s biggest businesses, firms which remain the cornerstone of the national economy.
Despite the recent scandals and the disastrous rollout of the Samsung S7 phone—which suffered from cases of spontaneous combustion—the Samsung S8 appears to going strong and the company’s stock has barely suffered in the wake of the scandal.
The current frontrunner in the race to replace Park is liberal candidate Moon Jae-in, who has promised to combat corruption. But again South Korea’s history makes one pause before buying fully into Moon’s promises. Moon was once the chief of staff to former President Roh Moo-Hyun, who committed suicide after getting embroiled in a corruption scandal.
President after president and politician after politician have succumbed to corruption scandals in South Korea. But even if the cases against Lee and Park go unchallenged, it will take deep and far-reaching reforms before any change occurs among the Chaebol elite.
For true reform public pressure needs to be maintained once the flashy headlines die down. Even if Park remains in prison, the corrupt institutions she worked in are still very much alive.
