Samsung’s decade-long legal risks: Who is responsible?

Samsung Electronics Chairman Lee Jae-yong recently acknowledged the reality of the "Samsung crisis" and called on the company's 2,000 executives across all affiliates to engage in thorough self-reflection with a do-or-die determination. He pointed out that the loss of "super-gap competitiveness" and "Samsung's unique identity" was due to the disappearance of innovation and bold challenges. Although not explicitly mentioned in his message, one of the core causes of Samsung's crisis is undoubtedly the legal risks that have plagued the company for the past decade.

Samsung’s legal troubles began with the 2016 presidential influence-peddling scandal. At the time, the current President, Yoon Suk Yeol, led the investigative team, while former ruling party leader Han Dong-hoon participated as a dispatched prosecutor in a special probe. The investigation targeted Lee, alleging that he engaged with former President Park Geun Hye to facilitate the merger of Cheil Industries and Samsung C&T. Prosecutors twice requested an arrest warrant, ultimately securing his detention and indicting him on charges including bribery. After being released on probation at the appellate level, Lee was re-imprisoned following a Supreme Court ruling that overturned the previous verdict. He was later paroled and finally granted a special pardon in August 2022.

In 2019, current Financial Supervisory Service Governor Lee Bok-hyun, then head of the Economic Crime Investigation Unit at the Seoul Central District Prosecutors’ Office, expanded the Samsung Biologics accounting fraud case into a broader investigation into alleged unfair mergers. This occurred during Yoon’s tenure as Prosecutor General. Despite the Prosecution Review Committee recommending the case be dropped by a 10-to-3 vote and a court dismissing an arrest warrant, prosecutors proceeded with an indictment against Lee in 2020 without detention. Both the first trial and the appellate court, which issued a ruling in February this year, acquitted Lee on all 19 charges. However, prosecutors mechanically filed an appeal, prolonging the legal battle.

While Lee attended court hearings nearly 200 times over the past decade, global competitors surged ahead. Taiwan’s TSMC expanded its share of the semiconductor foundry market to nearly 70%, while Samsung, once a strong contender, saw its share drop below 10%. Meanwhile, Apple cemented its dominance in the premium smartphone market, while Samsung lost ground even in emerging markets to Chinese manufacturers.

Outside of a few authoritarian regimes, no country subjects the CEO of a key national enterprise to prolonged legal entanglements over uncertain charges, restricting management activities. A significant share of responsibility for Samsung’s crisis lies with prosecution hardliners driven by political ambition. Yet, not a single prosecutor or judicial official responsible for damaging corporate competitiveness has been held politically or legally accountable. In such an environment, fostering and sustaining a global industry leader is an uphill battle.