The Korea Herald

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Samsung staff brace for corruption crackdown

By 김지현

Published : June 9, 2011 - 18:53

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Chairman Lee says scandal prevalent throughout conglomerate


Employees at Samsung, the nation’s largest industrial group, are expected to face a conglomerate-wide shakeup as owner Lee Kun-hee was unable to shake his fury over the latest corruption scandal at a Samsung affiliate.

“It seems that corruption is prevalent in all parts of Samsung,” was what Lee said on Thursday, a day after he said the company needed to beef up auditing to root out corruption and other irregularities.

The comments, industry watchers said, seemed to be a prelude to a company-wide crackdown, which Samsung has resorted to from time to time to keep employees on their toes.

“Samsung tends to take drastic management actions when it sees fit to jolt the employees,” said one corporate source, declining to be identified. 
A visitor looks at a military hardware display by Samsung Techwin Co. Ltd. (Bloomberg) A visitor looks at a military hardware display by Samsung Techwin Co. Ltd. (Bloomberg)

Lee appeared to take the latest scandal at Samsung Techwin to heart, mostly because it runs counter to the image Samsung has been building up since his father Lee Byung-chull, the Samsung founder.

One of the late Lee’s business philosophies was that while there could be mistakes and errors while one does business, corruption can never be tolerated, according to Samsung.

Lee Kun-hee also had stressed that consumers would not want to snap up goods produced by a corrupt company.

Oh Chang-suk, the chief executive officer of Samsung Techwin, recently stepped down over a corruption scandal at the affiliate.

Samsung Techwin is a Samsung affiliate with a business scope spanning security-related equipment, energy development and defense.

Samsung said Oh was not directly involved, but stepped down to take responsibility over the irregularities.

The last time a Samsung CEO stepped down was in 2007 when an employee at S1, a security service provider, committed burglary at a client’s home.

The specifics of exactly what the irregularities committed at Samsung Techwin were have yet to be revealed.

But industry watchers have narrowed it down to kickback practices.

Samsung Techwin, as a defense equipment manufacturer, is likely to have faced temptation to take kickbacks, mostly in the form of executives teaming up with their subordinates to take bribes from suppliers, sources said.

Many also believe that despite Samsung’s claims to the contrary, Samsung Techwin’s K-9 self-propelling artillery guns were involved in some way.

The Samsung auditing team undertook the probe into Samsung Techwin in the first place because of issues related to the K-9.

By Kim Ji-hyun  (jemmie@heraldcorp.com)