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The Peninsula

Economic Woes Discourage Corporate Discipline

Published August 18, 2021
Author: Korea View

What Happened

  • Following a highly publicized bribery conviction, Samsung Electronics Vice Chairman Lee Jae-yong was released from prison on parole.
  • This ruling follows the acquittal of two executives at SK Chemical and Aekyung Industrial Co despite the sale of harmful products.
  • In addition to these companies playing an essential role in maintaining a trade surplus, many average Koreans are relying on the successes of these conglomerates’ success in the stock market.

Implications: Economic insecurity reduces the state’s ability to discipline flagship corporations. Many South Koreans believe that conglomerates like Samsung play such an essential role in the economy that the state’s disciplinary measures against these entities would negatively affect their personal financial wellbeing – a concern that has become more pronounced in the face of the pandemic. Highlighting this widespread perception, 46% of the public believed Samsung VP Lee Jae-yong’s January sentencing was excessive and 70% of the public now supports his early release. The popular wariness is also reflected in the Justice Ministry’s statement that the parole was extended on the basis of concerns for the national economy.

Context: Conglomerates occupy a complex place in the South Korean public’s perception of the country’s economy. Many in the legal and business communities have claimed that harsh sentences against conglomerates would hurt the country as a whole given these companies’ role as exporters in the trade-dependent domestic market. Although Samsung’s operating profits surged while Lee served his sentence, business leaders argued that major decisions on future investments cannot be made without his presence. Moreover, five million people in South Korea own Samsung shares on the stock market, tying the success of the conglomerate to the financial wellbeing of households.

This briefing comes from Korea View, a weekly newsletter published by the Korea Economic Institute. Korea View aims to cover developments that reveal trends on the Korean Peninsula but receive little attention in the United States. If you would like to sign up, please find the online form here.

Korea View was edited by Yong Kwon with the help of Sean Blanco, Marina Dickson, and Jina Park. Picture from the flickr account of  g0d4ather

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