×

Samsung Chief to Resign, Sorry for Tax Scandal

South Korea's most powerful businessman on Tuesday announced he would step down as head of the giant Samsung Group following his indictment last week for tax evasion and breach of trust.

Kun Hee Lee
AP
Kun Hee Lee

In a shock announcement, Lee Kun-hee, 66, also apologised for the scandal which led to the indictments of nine other senior executives. But analysts pointed out his family will still control the country's largest conglomerate.

"I will step down from the Samsung chairman position today. I am saddened as there is still much to do and a way to go, but I will leave with all the faults of the past," an expressionless Lee said in a brief statement broadcast on national television.

The group will dismantle its powerful strategic planning office, which critics say is an opaque organisation able to wield influence across some 60 affiliates, including flagship company Samsung Electronics, a world leader in computer memory chips and flat display screens.

"I don't see anything more than a change of people in charge, there's no change at all in the fact that (the Lee family) will remain the owner," said Oh Suk-tae, an economist at Citibank.

Lee's son, Lee Jae-yong, considered as being groomed for the top slot at the group, is stepping down from his executive post within South Korea and will go abroad to serve in another role.

Shares in group affiliates such as Samsung Securities and Samsung Construction & Trading fell by as much as 4 percent on the news, that stunned markets and a public fascinated by the reclusive Lee, one of South Korea's richest men and most revered business leaders.

Listed Samsung group firms account for 20 percent of the total market capitalisation on the main board of the South Korean bourse, according to its data.

A special prosecutor in January launched a probe into corruption allegations after a former top legal executive at the group said some of its top management hid money and kept a slush fund to bribe politicians, prosecutors and officials.

The prosecutor found no evidence to support the bribery allegation.

If found guilty of tax evasion Lee could serve from five years to life in jail.

South Korean conglomerates, known as chaebol, powered South Korea from the ashes of the 1950-53 Korean War to become Asia's fourth-largest economy, but have been accused for years of having impenetrable management structures.

Critics say few changes have been made over the years at the family-run business groups, despite a number of high-profile convictions of their leaders.

In contrast, pro-business groups have voiced concerns that the probe has delayed important management decisions at Samsung.