UPDATE : 2018.10.17 WED 10:22
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Samsung Group prepares for long-drawn leadership vacuum

Samsung Group is expected to prepare for a long-drawn leadership vacuum, with its de facto leader being sentenced to five years in prison for bribery, industry watchers said Sunday.

A Seoul court passed the sentence against Samsung Electronics Vice Chairman Lee Jae-yong on Friday, finding him guilty of bribery, embezzlement and other charges in a massive corruption scandal that led to the ouster of former President Park Geun-hye earlier this year.

The Seoul Central District Court convicted Lee of providing 7.2 billion won (US$6.4 million) in bribes for the equestrian training of the daughter of Park's longtime friend and confidante Choi Soon-sil.

Prosecutors had demanded a 12-year jail term for Lee on charges of offering or pledging 43.3 billion won in bribes to win the government's blessing for a merger of two Samsung units under terms designed to increase his control over the entire Samsung empire. This move was seen by some outsiders as being part of a grand corporate strategy to cement a power transfer from his ailing father and group chair Lee Kun-hee who has been hospitalized since 2014.

Samsung Electronics Vice Chairman Lee Jae-yong. (Yonhap)

"With the court ruling, the group which had probably hoped that Lee would be freed, must now consider the possibility that it must be managed in the absence of the 'owner' who had effectively managed the company these past few years," an observer said. "The absence of Lee must now be seen as a constant instead of a temporary situation,"

He said that despite Lee being unable to take on a direct part in running the company, the conglomerate may move to a 'remote control' setting with the vice chairman managing, at least big issues related to South Korea's largest family-run business group or chaebol from his cell.

Samsung watchers said that Lee still seems to be making key decisions, pointing out that the group's corporate strategy office, the top decision making body that drew considerable public flak, was disbanded after the vice chairman's incarceration in February, and an announcement was made on investing 30 trillion won into a local semiconductor line in the coming years in July.

"Such critical moves can only be made by Lee," a business insider claimed, without providing details.

He said that while there are bound to be restrictions due to the flow of information that can reach Lee, there is no other recourse since important decisions still need to be made.

Observers said quick decision-making is becoming more important in light of the rapidly changing global market environment and in particular, the information technology (IT) sector that remains the core business chaebol.

Rivals and partners such as Apple, Google and Facebook are all moving into areas such as artificial intelligence, connected cars, electronic pay and smart educational systems that all have growth potential.

Others said that Samsung, which immediately appealed the ruling and is bracing for a prolonged legal battle, may be moving to establish a new control tower that can take effective charge of everyday operations.

Samsung Electronics' vice chair Kwon Oh-hyun has been representing the company at key events, although his authority has never been clearly defined.

Within local business circles, there are speculations that leading affiliates representing the manufacturing and financial arms will take control of their respective business spheres and manage them through a collective consultation process among top executives.

Such a system is possible because Samsung is well known for its talented top managers who are capable of running their respective companies in an effective manner with minimum oversight.

Reflecting such "a strong corporate infrastructure" some have said Samsung may move forward with key mergers deals that were suspended pending the results of the trial.

The last major purchase by Samsung was Harman International Industries in 2016.

In regards to the future course of the group, a Samsung executive claimed that there are no immediate talks of creating an emergency management system to cope with Lee's absence.

"At the moment, employees are still trying to recover from the shock of the court ruling," the executive who declined to be identified said. (Yonhap)

Sean Kim  edt@koreapost.com

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