(Bloomberg) -- Jay Y. Lee is once again a free man following a surprise ruling on Monday from a Seoul court that suspended a prison sentence for bribery.
Yet, for many in South Korea the Samsung heir's victory is a setback to President Moon Jae-in's pledge to curtail the power of the chaebol, the family-run businesses that have dominated the economy for decades.
Moon won the presidency after promising to put an end to business as usual for the country's corporate elite. Lee's sentencing last August helped convince many Koreans that these sprawling empires were going to be reined in. Now, some fear the court has sent a message that Samsung and the other chaebol are in the clear.
“I guess our nation has yet to step away from old habits of the cozy relationships between business and politics,” said Lim Ji-hyeon, a 22-year-old student. “I feel dumbfounded.”
The combined market value of the listed companies belonging to the five biggest chaebol accounts for about half of South Korea's benchmark Kospi index, according to data compiled by Bloomberg.
Lee isn't the only prominent executive to benefit from leniency in the courthouse: In December, a judge gave Lotte Group Chairman Shin Dong-bin a suspended 20-month sentence after a corruption conviction even though prosecutors had asked for 10 years in prison.
Popularity Ratings
Moon has struggled to deliver on campaign promises to reform South Korea's chaebol culture while he's preoccupied with North Korea's weapons tests. His approval rating in a Realmeter poll last month was less than 60 percent -- high compared to President Donald Trump and other global leaders -- but still his worst result since taking office.
“The government has been dilly-dallying over chaebol reform,” said Jun Sung-in, a professor of economics at Hongik University. “It will face more pressure to step up.”
A Seoul court had earlier convicted Samsung's Lee of bribing a confidante of former President Park Geun-hye in the hope the company would secure government support for a merger that would help his succession. Lee denied any legal wrongdoing and appealed the original sentence.
A string of other chaebol executives have over the years also managed to get off with suspended prison sentences despite convictions. Lee Kun-hee, Samsung Group chairman and Jay Y.'s father, was convicted twice: once for tax evasion in 2008 and for bribery in 1996. He was given a suspended three-year prison sentence for tax evasion, for which he was later pardoned by President Lee Myung-bak, and a suspended two-year prison term for bribery.
“Powerful people always win, whether it's in business or in politics,” said Jung Myeong-suk, a 65-year-old security guard. “When a commoner commits a crime, there's no forgiveness, but for those with status and power the entire system takes their side.”
Jay Y. Lee's grandfather founded Samsung 80 years ago, and his father built it into a powerhouse by expanding in semiconductors and smartphones. The sprawling conglomerate has dozens of businesses in insurance, construction, advertising and shipbuilding. The Lee family controls the group through cross shareholdings.
Significant Reforms
Soon after taking office, Moon appointed a widely known critic of the chaebol, Kim Sang-jo, as the head of the Korea Fair Trade Commission, the top regulator of the conglomerates. While Kim has initiated policies to increase scrutiny of the groups, Moon's government hasn't pushed any significant reforms through the legislature.
Compared to reforming the chaebol, policies to help lower-income workers are easier sells for the government. For instance, Moon backed a 16 percent increase in the minimum wage which took effect on Jan. 1. The new wage is 7,530 won an hour and Moon wants to raise it to 10,000 won by 2020.
“Major change is not on the horizon,” said Krystal Tan, an economist with Capital Economics in Singapore, referring to the chaebol. “Instead of cracking down on the chaebol, the government's focus has been on the other end of the inequality spectrum by increasing welfare benefits and minimum wages.”
Not everyone agrees the court's decision to let Lee go represents a setback for the cause of reform. People should focus on the time the Samsung executive spent in prison rather than the time he didn't serve, according to Park Ju-gun, president of corporate research firm CEOScore.
“The one-year-detention of Lee itself was a strong signal to chaebol showing the government would not accept any wrongdoings or misbehavior of family owners as part of their management,” said Park.
--With assistance from Edwin Chan
To contact the reporters on this story: Bruce Einhorn in Hong Kong at beinhorn1@bloomberg.net, Sohee Kim in Seoul at skim847@bloomberg.net, Jihye Lee in Seoul at jlee2352@bloomberg.net.
To contact the editors responsible for this story: Kenneth Wong at kwong11@bloomberg.net, Anjali Cordeiro, Dave McCombs
©2018 Bloomberg L.P.
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