60 Business The EconomistSeptember 7th 2019
1W
hen a courtin Seoul ordered that
Lee Jae-yong be released from jail in
February last year, Samsung’s boss had rea-
son to believe that the worst was over.
Moon Jae-in, South Korea’s left-wing presi-
dent, who had kept his distance from its
biggest chaebol (conglomerate) for its role
in the scandal that brought down his pre-
decessor, was quick to mend relations. Last
autumn he took Mr Lee on a jolly to North
Korea. Earlier this year, he launched his na-
tional semiconductor strategy at a Sam-
sung factory outside Seoul. For a while, it
even looked as though Mr Lee might be able
to resume the process which the judges
who handed down his sentence for bribery
had so rudely interrupted: restructuring
shareholding to ensure long-term family
control over Samsung.
Such hopes were dashed on August
29th, when the Supreme Court overturned
the ruling by a lower court that had sus-
pended Mr Lee’s prison sentence, and or-
dered his case to be retried. The judges said
that, contrary to Mr Lee’s claims, Samsung
had not been exhorted by a confidante of
Park Geun-hye, the disgraced former presi-
dent, when it gave her daughter three hors-
es worth around $3m. Rather, the horses
were bribes meant to ensure government
support for a controversial merger, which
was part of a plan to ensure the smooth
transfer of control to Mr Lee from his ailing
father (Samsung has always denied that
such a plan exists).
Critics of Samsung hailed the verdict as
a victory for transparency and the rule of
law. Mr Lee now faces months of uncertain-
ty ahead of his new trial—and, some ob-
servers believe, more time in prison. Prose-
cutors may feel emboldened to dig deeper
into his involvement in other cases in
which Samsung is embroiled. These in-
clude accusations that Samsung BioLogics,
an affiliate, fiddled its accounts to ease Mr
Lee’s succession, and that executives from
Samsung Electronics, the group’s crown
jewel, were complicit in destroying evi-
dence, possibly at Mr Lee’s behest (Mr Lee
and Samsung deny the charges).
The ruling is also troubling for Sam-
sung, which is already struggling with fall-
ing semiconductor prices, the fallout from
the trade war between America and China
and Japanese export restrictions on three
chemicals that are essential for chipmak-
ing. Mr Lee is not directly in charge of day-
to-day decision-making at the company.But strategic decisions about how to deal
with these and future challenges may still
be delayed until his fate is certain. Law-
makers, long cowed by South Korea’s most
powerful company, may push through
pending legislation that would curtail the
company’s ability to restructure in a way it
deems best for transferring control from
Lee senior, who has not been seen in public
since falling ill in 2014, to his son.
The verdict may also catch the attention
of another erring chaebol leader. Shin
Dong-bin, the boss of Lotte, a Korean-Japa-
nese conglomerate best known for its duty-
free shops, is awaiting a ruling on the sus-
pension of his sentence in a related influ-ence-peddling case (he maintains his
innocence). If the judges take their cue
from Mr Lee’s case, he too could face a lon-
ger prison term.
Advocates of corporate reform hope
that the verdict will convince Samsung and
other conglomerates to make good on their
vows to improve transparency and cor-
porate governance, which would benefit
them in the long term. Mr Lee’s previous
jail term, while bad for the company’s rep-
utation, had little impact on Samsung
stocks, suggesting its fortunes are not nec-
essarily tied to his. A decent corporate
structure would help the company more
than the scion’s swift return to the helm.^7SEOUL
Samsung’s boss thought he was out of
the woods. Not so fastSouth Korea’s chaebolProdigal son
Saddled with controversyO
n the nightof August 30th, soon after
zao—an app whose name means “to
make”—was launched, it proved so wildly
popular that its servers crashed repeatedly.
Almost as rapidly, a sudden backlash from
its many fans nearly unmade it. Technol-
ogy-news outlets and meticulous netizens
who had combed through the terms of its
user agreement found that by signing up,
users had granted zao “completely free”,
“irrevocable” and “perpetual” rights to allcontent they uploaded to its platform.
Furious comments flooded Apple’s app
store in China, where zao is now rated a
measly two stars out of five. (This did not
stop it from becoming China’s most-down-
loaded free app in the store.) WeChat, a
dominant Chinese app—always eager to
stick it to a potential rival—blocked zao
links from being shared on its messaging
service citing “security risks”. zao swiftly
removed the offending clause. On Septem-BEIJING
Chinese netizens are getting more privacy-consciousOnline behaviourAbout face