Posted by Oliver Nyumbu
April 24th, 2008 | 1 Comment »
It seems so fluffy this thing called trust. Perhaps it is fluffy until such time as the P&L or the Reputation of a business takes a hit because of alleged or actual wrongdoing. Such has been the fate of Lee Kun-hee the Chairman of Samsung which is South Korea’s largest conglomerate turning over $150bn. So, Mr Lee and three other top executives suddenly resigned two days ago following a year of allegations of financial wrongdoing - he was indicted on charges of tax evasion and breach of trust.
Commenting on the resignations, the Financial Times said, “The move is unprecedented in corporate Korea, where tycoons usually continue to run business groups even after being convicted of serious white-collar crimes. It comes as Samsung faces rising competition from emerging Chinese rivals”.
Breach of trust? Mr Lee’s father established the company 70 years ago. He’s run it since the 1980’s.
This charge comes at a time when a number of elements are combining to create a possible perfect storm for South Korea:
- a global market turmoil
- a new government which only came into power two months ago
- rising competition from emerging Chinese rivals
Curious isn’t it that while good governance is never a guarantee of business success, bad governance can really be bad news with huge implications.
Back to the FT. “After months of investigating, a special prosecutor last week concluded that Mr Lee, the chairman, had breached his financial duty by letting his children buy bonds of Samsung’s affiliates through irregular financial transactions, incurring losses at the companies”.
Perhaps, even in hard-nosed business, trust is not such a fluffy thing after all. What do you think?