Business Ethics and Sustainability in Samsung Company

This article discusses the bribery scandal that rocked Samsung Company in 2017, leading to the indictment of the company's top leadership and the impeachment of the South Korean president. It analyzes the ethical and sustainability issues that arose from the scandal and recommends ways to achieve sustainability in the company's commercial activities and leadership sustainability.

Business Ethics and Sustainability 1
BUSINESS ETHICS AND SUSTAINABILITY
Name:
Course:
Professor:
Date:

Business Ethics and Sustainability 2
Contents
Introduction......................................................................................................................................3
Case Description..................................................................................................................4
Analysis of Ethical and Sustainability Issues......................................................................8
Recommendations..............................................................................................................11
Conclusion.....................................................................................................................................13
Source Data References.................................................................................................................15
References......................................................................................................................................16

Business Ethics and Sustainability 3
Introduction
Ethics refers to virtues of likable values and character that help people in doing the right
things. Business ethics helps the management in an organization to run profitable and sustainable
business practices with an aim of either meeting the ethical legal requirements set by the
government regulatory bodies or due to the management commitment to sustainable
organization’s goals and objectives (Wang, 2014). The use of unfair and illegal means to acquire
an undue advantage over other people at individual capacity or at the organizational level is
ethically wrong. The organizational business code of conduct supplemented by the government
regulation seeks to seal loopholes where unethical leaders show intent to take undue advantage
of the other people in organizations (Fisher & Lovell, 2012).
The Samsung Company top leadership was in the year 2017 involved in a bribery case
scandal that touched on its acting chief head Lee Jae-Yong, its corporate strategy office top four
executives and the South Korean President Park Geun-Hye through her close secretive confidant
Choi Soon-Sil. Lee was indicted for giving out a bribe in the form of cash donations to Ms. Park
through Ms. Choi’s foundations. The president was impeached on November by the South
Korean parliament with possible charges of abuse of office awaiting her after a determination by
the constitutional court on whether she should be allowed to complete her term in office or be
ousted and tried(Sang-Hun, Kwaak & Mozur, 2017).
Lee offered the bribe in exchange for government favors in the voting process of
Samsung Company affiliates merger. The government through the National Pensions Service
was to support Lee in the voting exercise for the merger. This was to help Lee and his family to
maintain the imperial control of the Samsung conglomerate. The office of the special prosecutor

Business Ethics and Sustainability 4
found Lee, the four senior executives from the corporate strategy office and Ms. Choi culpable of
criminal charges and they were all indicted on bribery charges and embezzlement of the
company’s funds (Sang-Hun, Kwaak & Mozur, 2017).
Lee and the company top leadership sought to unfairly and unlawfully gain some
advantage in the process of deciding the 2015 Samsung affiliates merger. The merger would
make Lee the chief corporate head of the Samsung Company thereby inheriting the position from
his father. This contravened the ethical virtues of doing good through legal and just means. The
company lost a big amount of cash in the form of donations to Ms. Choi’s foundations thereby
bringing into question the utilitarian ethical value of the top leadership decisions and actions.
The company chief head and four other senior executives were indicted on bribery charges which
meant they had contravened the government regulated business practice code of conduct. Ms.
Park acted in total disregard of the presidential office when she accepted the bribe through her
cross confidant and accomplice.
The Samsung Company should design and adopt organizational cultural beliefs and
norms that are just and fair to all stakeholders, legally within the confines of the law and
ethically beyond a reasonable doubt. Both the company leadership and the president should
weigh the consequential benefits versus the costs of the actions they take and the discourse they
choose on behalf of the company and the country respectively.
Case Description
In the year 2017, Samsung Company was rocked with a case of bribery one year after it
was hit by a case of exploding Samsung Galaxy Note 7 smartphone batteries. The company’s top
leadership was grossly dragged in a corruption scandal pitying the South Korean president Park

Business Ethics and Sustainability 5
Geun-Hye. The head of the company, Lee Jae-Yong was arrested on February 2017 and indicted
on bribery charges and embezzlement of the company’s funds. This was after the conclusion of a
90-day investigation by the office of South Korea’s special prosecutor (Sung-Jun, 2017).
The indictment came few months after South Koreans in huge crowds took to the streets
to demand the ouster of Park Geun-Hye after she was implicated in the bribery scandal. The
citizens also demanded the prosecution of Lee and the other Company top leadership members.
Before then, the country had been struggling in the fight to end collusive links between top
government officials and the family-owned conglomerates that control the economy. Four senior
executives of Samsung Company were indicted afterward on the same bribery and embezzlement
of funds charges with three of them out of the four resigning from their positions (BBC News,
2017).
In December, the South Korean parliament voted in favor of a motion to impeach
President Park Geun-Hye. Ms. Park had been found culpable of fetching bribes from the
company in exchange for government favors (Al Jazeera English, 2017). The company chief
through Choi Soon-Sil who was a close ally of Ms. Park offered $38 million to the president in
exchange for the government support in the 2015 Samsung affiliates merger. This merger
assisted Lee to inherit the corporate control of the company from his sick father, Lee Kun-hee.
Lee senior had also been convictedtwice of tax evasion and bribery charges but each time he was
convicted, he received a presidential pardon and got freed from jail. This presidential pardon
norm was synonymous with senior leaders of at least six of the country’s conglomeratesthat
collectively generate revenue that’s more than 80% of the country’s GDP each time they were
charged and jailed.

Business Ethics and Sustainability 6
Lee Jae-Yong took over the head of the company role after his father got a heart attack in
the year 2014. Since then, the company had been experiencing hard and challenging times with a
case incident being the global recall of their Galaxy Note 7 smartphones due to the battery
problems that made them prone to catching fires. The four company top executive officials
indicted along with Lee were from Samsung electronics which was the company’s most secretive
and powerful corporate strategy office. This four were tasked in ensuring that the Lee family
doesn’t lose the imperial control of the company while as well ensuring that there was a smooth
transition of leadership from the father to son. However, after the unearthing of the bribery and
embezzlement scandal, the company decided to disband the corporate strategy office in what it
called an attempt to strengthen transparency in its corporate governance.
Ms. Park was found as criminally culpable in November 2017 by North Korea’s special
prosecutor Park Young-soo (Al Jazeera English, 2017). This is after it was established that Ms.
Choi was using her close connection to the president to extort tens of million dollars from
conglomerates. The special prosecutor also alluded to a possibility of Ms. Park facing
prosecution against extortionandbribe-taking charges once she exits the presidential office.
Samsung through its top leadershipwas accused of giving lump sum donations to non-profit
organizations owned by Choi Soon-Chil. This was done with an ulterior motive of winning the
governments support in the restructuring process of the company where Lee was supposed to
inherit his father’s position as the head of the company without due process being followed. This
support was granted to Lee through the National Pension Service after this government
controlled service fund voted in favor of the merger.
At the time Lee was being arrested, he was serving the company as the vice chair of
Samsung electronics. With his father still suffering a heart attack, he was assumed to be the

Business Ethics and Sustainability 7
overall head of the Samsung Company. Therefore, his arrest and trial had grave impacts on the
long-term performance of the company and although the short-term effects were almost
negligible at that time, the sudden leadership vacuum would impact on the short term and
medium term goals of the company.
The possibility of Ms. Park being granted permission to finish her presidential term was
left at the mercies of the constitutional court. The Samsung affiliates merger led to the National
Pensions Service Fund losing approximately $123million in favor of Lee Family that increased
its stock value by $758 million. The country had lost hope in the fight against corruption due to
the perennial leniency accorded to high profile personalities accused of white collar crimes.
However, with the impeachment and possible prosecution of the country’s president ant the trial
of the Samsung’s top leadership, public confidence appeared to be creeping back. The indictment
of the company top leadership greatly affected the company’s brand name and image.
Lee was convicted of bribery, embezzlement of company funds and hiding assets
overseas charges and jailed for five years. Choi Gee-sung and Chang Choong-ki who were
among the four top executives of the company charged along with Lee were also found guilty of
the same charges and sentenced to four years in prison. Park Sang-jin, former Samsung
electronics vice president and the executive vice president, Hwang Sung-soo were served with
suspended court sentences. Ms. Choi was found guilty of taking advantage of her proximity to
the president to solicit favors for her daughter and jailed for three years. The president ouster and
dismissal were upheld by the constitutional court and her trial on corruption charges initiated.
The company shares fell by a 1% margin after the court verdict (Kim, 2017). Ms. Park was found
guilty of abuse of power and corruption on April 2018 and sentenced to serve a 24 years Jail
term (The Guardian, 2018).

Business Ethics and Sustainability 8
Analysis of Ethical and Sustainability Issues
Business ethics refers to the study of professional business practices (Holland &
Albrecht, 2013). Different organizations and companies have codes of conducts aimed at
regulating and guiding the decision-making process in the activities of the organizations. The
code of conduct may be internal to the organization’s activities or under the general government
rules and regulations governing the running of businesses in a country. The decisions made by
the people at the helm of management in an organization affect the sustainability of the business
activities of the organization.
In the business ethics literature, firms are taken as moral agents with the ability to make
things happen and take action through their internal decision-making mechanisms and structures
(Ferrero & Sison, 2014). The Samsung Company through its corporate head Lee and the four
indicted executives in charge of the corporate strategy office acted on behalf of the Company
when they bribed the president through Ms. Choi in exchange for favors in the company
restructuring process. Mr. Leeand the four top executives breached the virtues enshrined in the
virtues ethics theory. Sustainability in business refers to a situation where the present business
needs in an organization are addressed in such a manner that the future business growth and well
being of the organization is not compromised (Sidiropoulos, 2014). The integrity and
truthfulness of the company’s top management were greatly dented by the bribery scandal. This
would have long-term effects on the company’s market dominance and customer perception.
Lee sought the government help through the National Pensions Service to unlawfully
manipulate the leadership change in the Samsung Company. From the utilitarian ethical theory,

Business Ethics and Sustainability 9
the balance between the bad consequences and the good consequences should lean towards the
good consequences (Greenwood, 2013). Contrary to this theory, the consequences of the bribery
act on the part of both the Samsung Company top leadership and the president (Ms. Park) and
her close confidant Ms. Choi led to an indictment of the company top leadership, a successful
impeachment and a possible prosecution of Ms. Park and the indictment of Ms. Choi.
The company exercised shareholder primacy at the expense of stakeholders balance
(Mason & Simmons, 2014). The intention to maintain and retain Lee’s Family imperial control
of the company contributed immensely to the bribery saga. The company wanted to ensure that
the Lee family maintains the control of the company activities by installing Lee as the heir to his
father’s position. This led to the violation of the deontological ethics theory that required the
company to follow the rules of what was right to avoid what was legally wrong (Paquette,
Sommerfeldt & Kent, 2015). The move to bribe the president in order to win the government
support through the National Pensions Service was a wrong move that led to the National
Pensions Service losing $123 million. However, the decision by the four executives in charge of
the corporate strategy office was morally irresponsible as they were aware that what they were
doing was legally and morally wrong. The voluntary choice to be in an office with clearly
predefined roles and duties made them ethically guilty.
To achieve leadership sustainability in an organization, justice, fortitude, prudence and
temperance virtues must be exercised at all levels and processes in an organization (Ardichvili,
2013). The move to unfairly and unlawfully install Lee as the apparent heir to the company’s
chief head position unfairly blocked any other person who had intentions to go for the position.
This move also violated the government set rules and procedures governing cases of mergers and
leadership changeover in conglomerates in South Korea. To achieve sustainability in the

Business Ethics and Sustainability 10
company’s commercial activities and leadership sustainability, the four business ethics virtues
ought to have been taken into consideration when searching for the next chief head of the
company.
Strategy is fundamentally an important aspect of an organization’s success and the
attainment of its sustainability goals (Bansal & DesJardine, 2014). The decision by the Samsung
Company top management to bribe their way through to win favors from the government was an
ill-informed strategy with dire long-termimplications on the company’s long-term goals and
sustainability.
President Park through Ms. Choi acted in total breach of the neo-liberalism government
regulation approach by interfering with the procedures set out in the government laws and
regulations in the case of mergers and leadership change for conglomerates. Neo-liberalism
theory posits that business organizations should be left free of state intervention by allowing
individual entrepreneurial skills to thrive in an institutional framework that’s free (Miller &
Rose, 2017). Her involvement was ethically and morally irresponsible as the government through
the National Pensions Service lost money in the scandal. The president should provide
inspiration and the momentum required in the fight against corruption in a country.This
implication of the president in unlawful activity would injure the credibility and integrity of the
higher office. Although the indictment of the Samsung Company top leadership restored
somepublic confidence in the fight against white collar crimes, the president’s successful
impeachment on integrity grounds provided a huge rift in the citizen’s trust in the presidential
office.

Business Ethics and Sustainability 11
The Samsung Company top management represents the face of the company. The chief
head is usually the figurehead of the company and junior employees in the company look up to
him/her as a source of inspiration and motivation. Sustainability leaders collectively or
individually take ethically just and fair actions with utilitarian benefits and outcomes that lead to
healthy sustainable commercial practices (Shriberg & MacDonald, 2013).However, the actions
of the Samsung Company’s chief head (Lee) and senior executives in the bribery scandal were
contrary to this principle. The decision by the Samsung Company top leadership to negate the
ethical values governing the process of leadership handover and mergers will have long-term
consequences on the Company’s industrial performance which will greatly affect the other
company stakeholders.
Recommendations
Ethical leaders exercise virtuous influence on their employees by acting as role models to
their juniors thereby bringing about sustainability in the business practice (Blok, Gremmen &
Wesselink, 2016). An effective leader is not only driven by justice, temperance, fortitude,
prudence, transcendence, and courage virtues but also by the sustained transformation of the
business undertaking (Trevino & Nelson, 2016). However, the need to flourish and maintain and
retain the good performance should not lead to the negation of the ethical virtues governing the
running of the business. Whether internal or government regulated, the ethical practices
governing the operations of a business practice are pertinent and critical in the success and
sustainability of the business success. Therefore, these ethical practices should always be
followed to the entirety for the success and sustainability of the business.

Business Ethics and Sustainability 12
Good leaders are anchored on utilitarian and virtue ethics, an embodiment to the rule of
law and high regard for the office they hold positions (Ciulla, 2014). The decision by Ms. Park to
assist Mr. Lee to clinch the Samsung Company senior-most leadership position was in total
disregard of the powers and privileges of the presidential office. The manipulation of the voting
process for the merger through the National Pensions Service was not only unlawful but also
unfair and morally unjust. Her actions deeply destroyed the public confidence on the presidential
office were she to win the case on her reinstatement or ouster at the constitutional court.The next
president would be required to cleanse the presidential office to win back the public confidence.
Ms. Choi abused her close connection and relationship with the president to extort huge
chunks of money from conglomerates in South Korea. She went against the temperance virtue
when she used her close link to the presidency to enrich herself and the non-profit organizations
she runs. The resultant effect was her arrest and indictment. This indictment was foreseeable and
preventable if only she had applied the four ethical virtues in her conduct and relation with the
presidency. Virtues driven leadership and moral behavior underpin the sustainability of a
leadership. The poor morals and lack of the temperance and prudence virtues on the part of Ms.
Choi’s code of conduct cost the president her position and an indictment on the part of Ms. Choi.
Therefore, those close to power and people in powerful positions should exercise restraint when
tempted to use their close links to people in power for personal benefit.
The moral norms and organization’s cultural beliefs should inform the ethical virtues to
be followed in an organization (Alesina & Giuliano, 2015). The belief by the Samsung top
leadership that the Lee family should maintain the imperial control of the company led to the
bribery scandal which had future long-term effects on the sustainability of the Samsung
Company commercial activities due to the destroyed public image. The company’s cultural

Business Ethics and Sustainability 13
beliefs and moral bedrock should be changed to be in line with the modern and global
organizations and government regulated ethical virtues to prevent a repetition of a similar case in
the future. The company corporate strategy office should be disbanded and the chief head
position be made open to all qualified applicants. The powers of the National Pensions Service in
the decision-making process for merging affiliate organizations should be limited.
Conclusion
Ethical behavior within an organization dictates the sustainable well being of the
organization. Sound rational and moral behavior requires decision makers in an organization to
not only consider their self-interest but also that of the other people within or outside the
organization while making decisions on behalf of the organization (Rupp, Shao, Thornton &
Skarlicki, 2013). Lee and the other four senior executives from the corporate strategy office
should have taken into consideration the interest of other people within the company and other
external stakeholders. However, these leaders only took into consideration the shareholder
primacy approach in dealing with the issue.
Plato and Aristotle contributions in the field of virtue ethics emphasize the integrity and
character as opposed to the repercussions of the actions taken (Crossan, Mazutis & Seijts, 2013).
The ethical virtues of the South Korean president were put into question after her close confidant
Ms. Choi was indicted for extorting huge amounts of cash from conglomerates like Samsung
company using her close connection to the president. Although the involvement of Ms. Park
wasn’t clearly explained, her partial or entire involvement dented her credibility and integrity to
lead the country. The public perception and belief in the presidency’s role in the fight against
graft were greatly compromised. And although Ms. Park indictment was still at bay due to her

Business Ethics and Sustainability 14
pending case to determine her suitability to lead at the constitutional court, her reinstatement
would not cleanse the already destroyed public image.
The social justice ethics theory postulates that an equal and fair opportunity should be
accorded to all people within an organization without segregating or according to anyone special
treatment. The company top leadership violated this principle when they went ahead to
unlawfully lobby for the installation of Lee as the chief head of the company. Other potential
candidates were not given an equal opportunity to go for the position. This lack of involvement
on the part of the Samsung Company employees in the leadership change would lower the
productivity of the company due to lowered employee morale thereby affecting the sustainability
of the company performance.Ms. Choi also violated this principle of social justice when she used
her close connection to the presidency to unfairly acquire wealth for her foundations.
The deontological ethics approach theorizes that actions taken must be justified in terms
of projected economic growth and the social welfare of all stakeholders (Beckmann, Hielscher &
Pies, 2014). The action taken by Lee and the four company executives was selfish and geared
towards the benefit of one individual (family) with no projected benefits for the company.
Ethical decision making in the Samsung Company should be informed on sustainable processes
and procedures. The company should adopt an ethical analysis approach that informs the
management of the decision-making mechanisms that promote sustainable development.The
need to achieve an organization’s leadership goals should not supersede the moral substance of
the actions taken. Business codes of conduct and government regulated industry and market
values and virtues should inform the business ethics in a company.

Business Ethics and Sustainability 15
Source Data References
Al Jazeera English, 2017. South Korea's Park named a suspect in bribery scandal. [video]
Available at: https://www.youtube.com/channel/UCNye-wNBqNL5ZzHSJj3l8Bg
[Accessed 10 Oct. 2018].
BBC News., 2017. Samsung heir jailed for corruption. [online] Available at:
https://www.bbc.com/news/business-41033568 [Accessed 10 Oct. 2018].
Kim, S., 2017. Samsung Heir Gets 5 Years for Scandal That Toppled a President. [online]
Bloomberg.com. Available at:
https://www.bloomberg.com/news/articles/2017-08-25/samsung-heir-sentenced-to-five-
years-prison-on-graft-conviction [Accessed 10 Oct. 2018].
Sang-Hun, C., Kwaak, J. and Mozur, P., 2017. Samsung Verdict Sends a Tough New Message to
South Korea Inc.. [online] Nytimes.com. Available at:
https://www.nytimes.com/2017/08/25/business/samsung-bribery-embezzlement-
conviction-jay-lee-south-korea.html [Accessed 10 Oct. 2018].
Sung-Jun, C., 2017. Billionaire Samsung heir convicted in bribery scandal that brought down
president | CBC News. [online] CBC. Available at:
https://www.cbc.ca/news/business/jay-lee-samsung-heir-bribery-moon-1.4261831
[Accessed 10 Oct. 2018].
The Guardian., 2018. South Korea: former president Park Geun-hye sentenced to 24 years in
jail. [online] Available at: https://www.theguardian.com/world/2018/apr/06/former-
south-korea-president-park-geun-hye-guilty-of-corruption [Accessed 11 Oct. 2018].

Business Ethics and Sustainability 16
References
Alesina, A. and Giuliano, P., 2015. Culture and institutions. Journal of Economic Literature,
53(4), pp.898-944.
Ardichvili, A., 2013. The role of HRD in CSR, sustainability, and ethics: A relational model.
Human Resource Development Review, 12(4), pp.456-473.
Bansal, P., and DesJardine, M., 2014. Business sustainability: It is about time. Strategic
Organization,12(1), pp.70-78.
Beckmann, M., Hielscher, S. and Pies, I., 2014. Commitment strategies for sustainability: how
business firms can transform trade‐offs into win–win outcomes. Business Strategy and
the Environment, 23(1), pp.18-37.
Blok, V., Gremmen, B. and Wesselink, R., 2016. Dealing with the wicked problem of
sustainability: The role of individual virtuous competence. Business and Professional
Ethics Journal.
Ciulla, J. ed., 2014. Ethics, the heart of leadership. 3rd ed., Santa Barbara, California: ABC-
CLIO, pp.127-222.
Crossan, M., Mazutis, D. and Seijts, G., 2013. In search of virtue: The role of virtues, values and
character strengths in ethical decision making. Journal of Business Ethics, 113(4),
pp.567-581.
Ferrero, I. and Sison, A.J.G., 2014. A quantitative analysis of authors, schools and themes in
virtue ethics articles in business ethics and management journals (1980–2011). Business
Ethics: A European Review, 23(4), pp.375-400.

Business Ethics and Sustainability 17
Fisher, C., & Lovell, A., 2012. Business ethics and values. 4th ed.London: Prentice-Hall, pp 624-
626.
Greenwood, M., 2013. Ethical analyses of HRM: A review and research agenda. Journal of
Business Ethics, 114(2), pp.355-366.
Holland, D. and Albrecht, C., 2013. The worldwide academic field of business ethics: Scholars’
perceptions of the most important issues. Journal of business ethics, 117(4), pp.777-788.
Mason, C. and Simmons, J., 2014. Embedding corporate social responsibility in corporate
governance: A stakeholder systems approach. Journal of Business Ethics, 119(1), pp.77-
86.
Miller, P. and Rose, N., 2017. Political power beyond the state: Problematics of government. In
Foucault and Law (pp. 191-224). Routledge.
Paquette, M., Sommerfeldt, E.J. and Kent, M.L., 2015. Do the ends justify the means? Dialogue,
development communication, and deontological ethics. Public Relations Review, 41(1),
pp.30-39
Rupp, D.E., Shao, R., Thornton, M.A. and Skarlicki, D.P., 2013. Applicants' and employees'
reactions to corporate social responsibility: The moderating effects of first‐party justice
perceptions and moral identity. Personnel Psychology, 66(4), pp.895-933.
Shriberg, M. and MacDonald, L., 2013. Sustainability leadership programs: Emerging goals,
methods & best practices. Journal of Sustainability Education, 5(1).
Sidiropoulos, E., 2014. Education for sustainability in business education programs: a question
of value. Journal of cleaner production, 85, pp.472-487.

Business Ethics and Sustainability 18
Trevino, L. and Nelson, K., 2016. Managing business ethics: Straight talk about how to do it
right. 7th ed. Hoboken: John Wiley & Sons, pp.257-295.
Wang, C.J., 2014. Do ethical and sustainable practices matter? Effects of corporate citizenship
on business performance in the hospitality industry. International Journal of
Contemporary Hospitality Management, 26(6), pp.930-947.