- The Washington Times - Wednesday, April 23, 2008

SEOUL — Samsung Chairman Lee Kun-hee announced his resignation yesterday, prompting concerns over the future of South Korea’s economy while stunning a nation where leaders of giant conglomerates are treated with extraordinary deference.

With interests in semiconductors, cell phones, appliances, construction, shipbuilding and finance, the Samsung group has annual revenues of about $150 billion and accounts for about 15 percent of South Korea’s gross domestic product.

“I express my deepest apologies for causing great concern to the public as a result of the special probe,” Mr. Lee, 66, told a nationally televised press conference to announce his departure.

Mr. Lee and his family have been under a special prosecution investigation, mandated by the National Assembly, after a former in-house lawyer exposed corrupt dealings at the group.

The prosecution said it had uncovered $4.6 billion in hidden assets. Mr. Lee and Samsung Vice Chairman Lee Hak-su, who runs the group”s day-to-day business, were both indicted last week on tax-evasion charges.

Prosecutors, however, dismissed the most politically damaging claim — that the company intended to bribe influential South Koreans — because it lacked enough evidence to proceed.

Yesterday’s bombshell announcement was likened by some analysts to a royal abdication instead of a business retirement.

“I can”t think of another case like it,” said Tom Coyner, author of “Mastering Business in Korea.”

“The era of the ‘masters of the universe” is coming to an end,” he said.

Even the fact that Mr. Lee held a press conference was astonishing. The Samsung chairman, sometimes dubbed “the most powerful man in Korea” was rarely seen in public.

Lee Jae-young, the chairman”s son who was widely expected to succeed his father, will be moved to an overseas posting, leaving his current position of “chief customer officer” at group flagship Samsung Electronics.

The younger Mr. Lee was the subject of an investigation into receiving shares at below-market prices in Samsung Everland, the group”s de facto holding company.

Lee Kun-hee”s wife, Hong Ra-hee, who is accused of using illegal funds to acquire art, will resign as director of the Samsung-owned Leem Art Museum.

Lee Kun-hee took over chairmanship of the group in 1987 after the death of his father, Lee Byung-chull.

Initial concerns that his resignation would affect South Korea’s economy were tempered because the company’s main subsidiaries, such as Samsung Electronics and Samsung Engineering and Construction, are led by professional CEOs.

Shares in Samsung Electronics gained 0.2 percent to $675, while shares in some other Samsung companies fell. Samsung C&T; Corp., the group’s construction and trading arm, slid 9 percent to about $114.

Some analysts saw a silver lining in terms of future business practices in a nation long plagued by big corporate scandals.

“In the previous [scandals] of Hyundai Motor, SK Corp, and others, the chairmen were briefly jailed, then came back to management,” said Jang Ha-seung, dean of Korea University”s business school and a prominent shareholder rights activist.

“Chairman Lee looks like he will not go to jail, but he took responsibility; for other chaebol, it sets an example,” Mr. Jang said, using the Korean term for business conglomerate.

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