Samsung Bribery Charges and International Business Practices

Samsung Bribery Charges and International Business Practices 1
Samsung Bribery Charges and International Business Practices
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Samsung Bribery Charges and International Business Practices 2
Introduction
The paper intends to evaluate the bribery scandal associated with the heir to the Samsung
empire who was charged with the offense in 2017, incarcerated and then even before one year
ended, he was freed. The paper will demonstrate how bribery as a business practice is against
international business practices. The analysis will reveal that the move by South Korean court to
free Mr. Lee is unacceptable move and it encourages bribery and that it is against the
international convention on bribery and corruption.
Samsung Bribery Charges
According to Harris (2018) the heir to the Samsung empire was sentenced in 2017 by
South Korean justice to five years in prison for corruption in the resounding scandal that swept
away South Korean President Park Geun-Hye. This ruling could deprive the world's leading
maker of captain's smartphones for a long time, and thereby hinder its ability to make crucial
investment decisions. But Samsung Electronics has ensured a strong team at the rudder. The
prosecution had required 12 years in prison against Lee Jae-Yong, vice president of Samsung
Electronics and son of Samsung group president Lee Kung-Hee (Harris and Jung-a 2018).
Mr. Lee, 49, was found guilty of bribery, abuse of social good, perjury and other counts
in connection with payments to Ms. Park's shadowy confidante, Choi Soon-Sil. Lee Jae-yong,
who, according to the Financial Times, is possibly the most powerful man in his country, was
notably accused of having promised 43.3 billion won (35 million euros) to foundations created
by Choi Soon-sil, friend and confidante of President Park Geun-hye (who was dismissed and
incarcerated in March) (Sang-Hun, 2018). In return, the government supported the merger, in
2015, of two subsidiaries of the group, Samsung C & T and Cheil Industries, a highly contested
operation that was primarily intended to strengthen the hold of Lee Jae-yong on Samsung (Harris

Samsung Bribery Charges and International Business Practices 3
and Jung-a 2018). The court has estimated that it has paid a total of 8.9 million won (6.6 million
euros) to buy the government's support for the generational handover to the top of the group
following the heart attack of his father in 2014 (Financial Times Limited 2018). Mr. Lee denies
everything, his defense explaining that he was not aware of these transfers and did not approve
them (Harris and Jung-a 2018).
However, one year later, Mr. Lee was freed. According to Sang-Hun and Zhong (2018)
Mr. Lee barely spent one year before he was freed. Sang-Hun and Zhong (2018) further revealed
that in South Korea, tycoons are not punished. There is no way in which 15 years can be reduced
to less than one year.
Analyzing the case from international business practices
In this section, I will demonstrate that the action taken to prosecute Mr. Lee due to
bribery case is theoretically sound and that it is an affirmation of the international laws on
corruption and bribery. Bribery and corruption are two vices that hinder fair trade. However, the
action to free him after barely one year is unacceptable. It is an indication that the powerful are
above the law and this is not good in business world (Bomann-Larsen and Wiggen, 2005)
One of the theories that can explain the situation facing Samsung is Principle-Agent-
Client theory proposed by Banfield in 1975. The theory believes that corruption is committed by
a combination of three players; principle, agent and influencer.. For the case of Samsung, the
principal is the President Park. Park was bound to be the major beneficiary of the bribery. Mr.
Lee represents the agent. The third party is royal family. The family are truing to obtain benefits
from the Samsung company and hence are indirectly sponsoring the bribery. The rational choice
theory reveals that an agent is likely to execute corrupt deals if the returns are favorable. And he
did that exactly. But what about the consequences? International business practices expect that

Samsung Bribery Charges and International Business Practices 4
the competition and business practices are fair to all parties. In international realm, corruption
represents a major threat to sustainable development (OECD, 2013). Shattering the democratic
process of commercial practices the multiplication of corrupt pacts breaks the equality of
commercial actors, just as it distorts the free competition. Mechanisms, imposed or voluntary,
which establish the relations between the business world and criminal circles are more and more
protean to the point of raising, today, the problem of organized business crime (Donaldson and
Preston, 1995). Obtaining contracts by international commercial transactions, administrative and
fiscal derogations, the takeover of companies following the acquisition of information, which
occur through the payment of hidden commissions, are all acts benefiting speculators few
scrupulous at the expense of other investors. The consequences, adverse effects on entire
populations and the credibility of companies, are colossal. First, with regard to the effects on the
populations, and particularly on the states experiencing economic difficulties, the lack of
transparency and responsibility of the public and private sectors is the fertile ground facilitating
the payment of bribes: a payment of a commission of one million euros can lead to a loss one
hundred times higher for a country then undergoing a cancellation of the projected development
plans (Bonell & Meyer, 2015).
Corruption permeate all countries. In South Africa, the Shaik lawsuit has highlighted the
responsibility of multinationals for the payment of bribes in arms market transactions involving
French companies. Moreover, corruption does not only concern states experiencing economic
difficulties (Ghoshal and Moran, 2005).
Nevertheless, there is an awareness of the need to fight against such a scourge. Following
the signing of the OECD and UN conventions, many countries have adapted their legislation on
corruption, particularly since 2005 (OECD 2009).