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'Republic of Samsung' Confronts a Backlash

The company reaches nearly every aspect of South Korean life. And as a political bribery scandal unfolds, some people say it's out of control.

September 25, 2005|Don Lee | Times Staff Writer

SEOUL — Cho Sung Yoon and his wife live on the 27th floor of a Samsung apartment complex here.

They cook their food on a Samsung electric range. They call each other on Samsung cellphones and check their e-mail on a Samsung home computer.

Recently, they used their Samsung credit card to get a 30% discount at a water park at Samsung Everland, South Korea's largest amusement park. If the couple had a serious mishap there, they would have been covered.

Their insurance company? Who else: Samsung.

Samsung is now one of the world's most recognized brands of electronic goods, and South Koreans regard it as a source of national pride. "There should be more companies like it," says 44-year-old Cho, who works at a marketing business.

But Samsung is so pervasive and its influence so immense in South Korean society that many here say it has turned the nation into a giant company town. They call it the Republic of Samsung.

"They're too big," Cho's wife complains.

Like America's Rockefellers, Morgans and Vanderbilts of a century ago, the family that controls Samsung is contending with a populace increasingly wary of the corporation's vast wealth and power. Many South Koreans are troubled by what they view as Samsung's corporate arrogance and tentacle-like reach in society.

With the biggest life insurance, brokerage and credit card operations in the nation, Samsung has personal data on millions of South Koreans, which makes some citizens nervous. Small businesses complain that, like Wal-Mart, Samsung demands too much from contractors who make goods to sell under the firm's name.

Samsung Group's reclusive chairman, 58-year-old Lee Kun Hee, South Korea's richest man, with an estimated fortune of $4 billion, has come under fire, accused of running the corporation like a feudal lord. Civic groups comprising scores of lawyers, professors and accountants have mobilized and filed lawsuits to push Samsung to operate more transparently and give minority shareholders a greater say in the company's affairs.

Government officials called for an investigation of Samsung's campaign activities after revelations in July that company representatives paid more than $10 million in bribes to candidates in South Korea's 1997 presidential elections.

The scandal led to the resignation of South Korea's ambassador to the United States, Hong Seok Hyun, Lee's brother-in-law and a former newspaper publisher who is said to have delivered bags of cash personally to at least one candidate.

"Samsung's growth is out of control," says Kim Sang Jo, a Hansung University professor turned anti-Samsung activist. "It's not only concentration of economic power but political and social power. That can deteriorate democracy of Korean society."

Says Kim Jae Hong, a member of the National Assembly: "This will be a great lesson not only for Samsung but for all conglomerates not to commit such acts again."

Samsung has apologized to the public for causing "social confusion" but has not admitted wrongdoing. Its spokespersons declined requests to interview Lee and other senior company executives.

Samsung officials point to independent surveys suggesting that South Korean public opinion supports them. And so far, they say, it hasn't hurt Samsung sales.

Many South Koreans doubt that Samsung will be cowed by the scandal. "They won't become weaker or suffer from this," says Jhang Ho Gyu, 27, a graduate student in Seoul. "Samsung lawyers will prevent and block any possible attack."

South Korea's economy has long been dominated by family-owned conglomerates. These companies, called chaebol, played a powerful role in lifting South Korea out of poverty and turning it into the world's 11th-largest economy. Analysts estimate that Samsung, Hyundai Group, LG Group and other chaebol account for the bulk of South Korea's exports and tax revenue.

Samsung is the biggest of them all. With 61 affiliate companies, whose operations include aircraft engines, hospitals, hotels and textiles, Samsung makes up an estimated 15% of South Korea's economic activity, analysts say. Its products account for one-fifth of the nation's exports. Samsung says one-fifth of its $122 billion in revenue last year came from sales in North America.

In many parts of Seoul, the nation's capital, it's hard to pass a street without feeling Samsung's presence. There are 227 apartment complexes in Seoul and other cities with "Samsung" emblazoned on them. Signs bearing Samsung's blue-and-white logo jut out from countless storefronts selling Samsung digital products, stocks and security services. Samsung employs 135,000 people in South Korea, one of the largest workforces in the nation.

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