On Tuesday afternoon, the six-year long investigation over Samsung Electronic’s dealings with labor unions came to a close, as the courts announced that Lee Sang-hoon, the chairman of Samsung Electronic Co.’s board was convicted of violating South Korean labor union laws and sentenced to 18 months in jail, according to The Wall Street Journal.
Back in 2013, Samsung Electronics was in the legal hot-seat after a lawmaker disclosed internal company documents containing strategies on how to shut down the Samsung Labor Union that was formed in July 2011.
The investigation seemed to end in 2015 without charges, but was revived after prosecutors found additional evidence while looking into another case, arguing that Lee has committed “an organized crime that mobilized the whole company to its full capacity.” This included executives allegedly threatening to cut wages from employees and withdraw business from subcontractors that supported unionization.Embed from Getty Images
And then came the 2008 indictment naming 32 individuals for allegedly violating labor-union laws. Prosecutors in the case claim that Samsung has an ongoing policy of not tolerating labor unions, which has resulted in less than 300 of the company’s 200,000 South Korean employees becoming members of such organization.
What are the odds that this indictment comes just months after Samsung’s de facto leader, Vice Chairman Lee Jae-yong’s surprise early-release from prison on a suspended sentence for corruption charges relating to South Korea’s impeached president Park Geun-hye?
This ruling adds yet another complex layer to the company’s growing list of legal challenges and another example of the world’s tech giants finally being held accountable for its lack of judgment.
Lee, 64, served as Samsung Electronics’ chief financial officer before becoming chairman of the board two years ago. What’s particularly disturbing involving this case is that there are approximately 24 current and former Samsung officials and others involved in the case who were also found guilty on similar charges.
The cast-at-bar focused on Lee’s attempts at dismantling the labor union at the company’s customer-service unit, which included gathering personal information on some union members, such as their marital status, personal finances, and mental-health histories. In other words, regulated and very sensitive personal and financial information that at least in the U.S., is governed by federal regulation.
After the court’s ruling, Samsung Electronics has declined to comment, including Lee’s legal representative. So, what options does Lee have following the court’s ruling? Well, he can appeal the court’s decision, but not sure what that outcome will look like.
Let’s be real here—this isn’t a good look for Samsung, the world’s largest smartphone and memory-chip maker, but it doesn’t seem that this will affect the company’s investors too much.
Midday Tuesday before the court decision was announced, the company’s shares had risen about 2.4%, with the company closing the day up 3.4% versus a 1.3% rise in South Korea’s benchmark Kospi index, the index of all common stocks traded on the Stock Market Division, previously known as the Korea Stock Exchange.
Additionally, the company is focused entirely on both revamping its production of memory chips and dominating that industry, all while addressing the national bribery scandal involving South Korea’s former president, Lee Jae-yong, the conglomerate’s de facto leader.Embed from Getty Images
While the effect won’t seem to damage investor relations too much, Lee’s prison sentence will jeopardize the company’s decision-making abilities. Lee, who is chairman of the 10-person board, is responsible (or was) for convening quarterly board meetings and reviewing the company’s financial statements before they are sent to shareholders for voting, among other responsibilities.
As the company approaches its annual shareholder meeting in March, there will need to be some serious delegation and communication.
Currently, Kang Kyung-hun, an executive vice president, along with other current chief executives at other Samsung affiliates, Samsung Card Co. and Samsung C&T Corp, were also convicted.