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(Yonhap Interview) Compliance committee keeps Samsung in check, works to ensure it resists political clout: committee chair

07:00 August 27, 2023

SEOUL, Aug. 27 (Yonhap) -- Ensuring compliance and ethics is taking root in the corporate culture within Samsung Group, its compliance committee chairman has said, as its management learned the lesson that it must pay a heavy price for unethical business practices.

"The culture of having a (potentially sensitive) issue reviewed by the compliance committee has been established within Samsung," Chairman Lee Chan-hee said during a recent interview with Yonhap News Agency.

"I think management now believes abiding by the law is much more helpful in doing business. They paid a costly price for caving to short-sighted gain and political pressure," he said.

Last week, the independent corporate compliance oversight committee recommended the group rejoin a business interest group that it withdrew from years ago amid a high-profile corruption scandal involving its de facto leader Lee Jae-yong and the ousted former President Park Geun-hye.

But the recommendation came with strings attached: Samsung should leave the Federation of Korean Industries (FKI), the country's largest business lobby, again if another corruption case occurs.

The FKI was blamed for its suspected intermediary role in pressuring major businesses to pay contributions to two foundations with ties to a close confidante of Park at the center of the massive influence-peddling scandal.

Samsung Electronics' Executive Chairman Lee was sentenced to 2 1/2 years in prison after being convicted of bribery in connection with the scandal. He was released on parole in August 2021 and reinstated after receiving a presidential pardon a year later.

Lee Chan-hee, chairman of Samsung Group's independent corporate compliance oversight committee, speaks during an interview with Yonhap News Agency in Seoul on Aug. 23, 2023. (Yonhap)

"I personally believe the FKI should be given a second chance to show that it severed its cozy relations with the government and to reinvent itself as a group that truly represents business interests," he said.

Fifteen Samsung affiliates, led by Samsung Electronics, pulled out of the FKI in early 2017, acting on a pledge by Executive Chairman Lee to clean up the business after the scandal. The country's four biggest chaebol have also withdrawn their FKI memberships.

Last week, the FKI announced a string of measures to restore its tarnished reputation. Overhauling its organization and setting up an ethics committee are among them.

"The world has changed. ... Businesses will have been under unbearable pressure if they are to repeat past malpractices, even after such a huge influence-peddling scandal," he said.

It has become really difficult for Samsung to make "unauthorized" donations, with the committee's approval process in place, he said, adding, "The committee, in a sense, serves as a piece of protective gear for Samsung from (political) pressure.

"I am certain there is very little chance that Samsung is engaged in illegal activities like it was in the past, as long as the committee does its job," he said.

Lee Chan-hee, chairman of Samsung Group's independent corporate compliance oversight committee, enters a Samsung building in southern Seoul on Aug. 18, 2023. (Yonhap)

In 2020, Samsung launched the committee to monitor corporate compliance with laws and ethics, after a court ordered Samsung's Lee in October 2019 to come up with measures to prevent ethical lapses at the company.

On the need to reform the group's complicated cross-shareholding structure to loosen family control, the committee chairman said there is no easy fix.

"It is easy to tie a knot. But it is extremely difficult to untie it, when the knot is tied multiple times," he said. "Given the importance of Samsung in the country's economy, we should also approach the issue very carefully."

The chair also said he personally believes the group should revive the "control tower," a centralized management structure overseeing Samsung's sprawling subsidiaries.

Following the scandal, Samsung dismantled the structure, seen as a vehicle for the founding Lee family to consolidate power in the business empire.

"Samsung is not a small yacht. It is a huge aircraft carrier. In terms of efficiency and unity in running the empire, I do think a control tower is necessary," the chairman said.

"As times change, views on the control tower and the FKI change. While we might sometimes step backwards a little, we can never go back to the past completely."



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