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Samsung’s Leadership Crisis May Be Worse Than You Think

After reading The Wall Street Journal’s outstanding new article about Jay Y. Lee, the head of the Samsung empire who has been arrested in South Korea on bribery charges, I reread the profile I wrote 18 months ago about him. Coincidentally, the events that led to Lee’s recent arrest occurred just as I was publishing that article. His fateful meeting with the president of his country happened the week after I left Seoul.

I covered a lot of topics in my feature story. I wrote about Lee’s efforts to modernize the corporate culture of Samsung, a key element of The Journal’s fresh reporting. I also wrote about Samsung’s strengths and weaknesses, its penchant for following others, its dominance in semiconductors, and the new ground it is breaking in an area of pharmaceutical manufacturing called “biologics.”

One line in my long article stands out now. “Lee has told people he understands the downside of being an enigma,” I wrote in the summer of 2015. “He has said he understands the need to demystify the role of the founding family.”

With his arrest, Samsung’s founding family faces its greatest crisis ever. The heads of Korea’s conglomerates frequently have faced prosecution followed by little or no time in jail. Jay Y. Lee’s own father was convicted and pardoned. His first cousin, head of a non-Samsung conglomerate known as CJ, spent a brief time in prison a year ago.

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Reading the political winds from afar, this time could be different. The Korean people have mixed emotions about the chaebol, as the conglomerates are known. They experience pride and revulsion simultaneously, the former for all Samsung and its ilk have accomplished, the latter for the advantages they have enjoyed. The advantages might soon deteriorate significantly, especially if South Korea’s democracy, frequently described as “young,” decides it is time.

How will this affect Samsung’s businesses? For the time being, they seem to flourish or flounder no matter who the company’s titular leader is. A company can’t outrun its own culture, though. Were Jay Y. Lee to be sidelined indefinitely Samsung would be sailing in uncharted territory.