War Profiteer of the Month: Samsung

Company Snapshot

The Samsung Group is South Korea's largest conglomerate and a global multinational corporation leading several major industries. It is composed of numerous businesses, including Samsung Electronics, the world's largest electronics company, Samsung Heavy Industries, one of the world's biggest shipbuilders and Samsung Engineering & Construction, a major global construction company. These three businesses form the core of Samsung Group and reflect its name — the meaning of the Korean word samsung is "tristar" or "three stars". Samsung Group has a corporate responsibility for South Korea, forming a vital core part of the South Korean economy, accounting for more than 20% of the nation's total exports. The company has a powerful influence on the country's economic development, politics, media and culture. Samsung Group is South Korea's largest company and exporter, the 5th largest transnational corporation in the world. Starting in the 1990s, Samsung became a world leader in memory chip production, and in recent years it has been one of the largest producers of flat-panel displays and mobile phone sets. A few years ago the company was being described as the "new Sony," but it is now facing intensified competition as well as a wide-ranging corruption investigation launched by Korean prosecutors in late 2007.

Accountability overview

The company’s reputation was tarnished later in 2005 when it pleaded guilty and paid a $300 million fine after being charged by U.S. government prosecutors with conspiring with the Korean company Hynix Semiconductor and the German Infineon Technologies to fix memory chip prices worldwide. That same year a Korean court convicted two Samsung executives of breach of trust for helping pass control of the group from Chairman Lee Kun Hee to his children—to the detriment of other shareholders.

In late 2007 Korean prosecutors launched a wide-ranging investigation of bribery and accounting irregularities throughout the Samsung Group. In mid-January 2008, investigators raised the office of Samsung’s chairman and the homes of his aides. According to press reports, prosecutors are looking at accusations that Chairman Lee and those aides amassed large slush funds to bribe government officials.

Labor

To this date, Samsung maintains a strict "no labor union" policy inside Korea, by closely monitoring workers and sometimes establishing "ghost labor unions" to prevent the creation of real ones. (Under Korean law, a company can have at most one labor union.) Although this has drawn intense criticism from Korean labor activists, many conservative media, including Joongang Ilbo with its close ties with Samsung group, actually views this as a case study of why labor unions are bad for economy and should be suppressed at each company's discretion (because Samsung has been immensely successful as a company).

Anti-competitive and consumer protection

On November 30, 2005, Samsung pled guilty to a charge it participated in dynamic random access memory chip (DRAM) price fixing collusion during 1999-2002 that damaged competition and raised PC prices. In a deal with prosecutors, Samsung Electronics Co. Ltd. and its U.S. subsidiary, Samsung Semiconductor Inc., were to pay a $300 million fine. As a result of this investigation, Hynix was to pay $185 million in 2005, and Infineon $160 million in 2004. Micron Technology, the US firm who initiated the case, cooperated with prosecutors and no fine is expected. Also, five Samsung executives along with four executives each from Infineon and Hynix and one from Elpida and one from Micron technologies received a prison sentence with the longest being 10 months by Young Hwan Park, president of Samsung Semiconductor Inc. For the U.S. Justice Department's press releases go here and here. For the plea agreement go here.

On September 7, 2007, the International Herald Tribune reported that Park Kwang-kee, managing director of Thai Samsung Electronics Co. Ltd., and Kim Chung-jun, the company's general manager in Thailand were arrested and charged with fraud: "Kim, allowed to speak to reporters at a news conference at the economic and cyber crime division, denied the allegations and said they were the result of a business dispute."

A spokesperson for TWZ subsidiary Sam Corp. said the company filed a lawsuit alleging that Park had breached an agreement by refusing to pay promised promotional funds to help it sell Samsung mobile phones after obliging Sam Corp. to buy outdated phone models.

In 2006, RealTechNews reported that Samsung was being sued by various movie studios for a DVD player they claimed was "hacker-friendly."

Political influence (national and international)

In November 2007, Korean prosecutors launched a probe into allegations by a former company attorney that Samsung Group officials kept a slush fund and bribed prosecutors, judges and lawmakers. Among the allegations are that chairman Lee Kun Hee masterminded a bribery network and paid out millions to facilitate the illegal transfer of a controlling stake in the family business to his son. The claim is that from 1997 to 2004, Samsung bribed senior politicians, journalists, bureaucrats and court officials to win special deals for the business.

In 2005, a Seoul court convicted two Samsung executives for breach of trust for allowing the younger Lee to buy a controlling stake in Samsung's holding company for less than 10 percent of its market value. In response to that ruling (which is under appeal), chairman Lee agreed to donate $880 million to fund a charity for needy students and make amends "for wrong customs in the past," as he put it.

Samsung consistently denied the allegations, which were made by former Samsung lawyer Kim Yong-chul. Kim, a lawyer who worked at Samsung Group from 1997-2004, said the alleged slush fund totaled $215 million.

Executives were banned from leaving the country and prosecutors ransacked Samsung's offices.

On November 23, 2007, ABC reported that the South Korean Parliament had voted to allow an independent counsel to investigate the case.

The Corporate Crime Reporter listed Samsung America Inc. as # 100 on its top 100 Corporate Criminals of the 1990s list. According to CCR, "Samsung America Inc. pled guilty to violating the Federal Election Campaign Act. The company made $10,000 in illegal contributions to the 1992 Jay Kim for Congress Campaign Committee." (10 Corporate Crime Reporter 6(5), February 12, 1996)

Samsung is stamped on many Koreans as a proud Korean No.1 corporation, which they hope to get a job with. To maintain this good image, Samsung hires top celebrities for their advertisements and pays bloggers to post a good reviews about Samsung mobiles on their blogs. The major media doesn't print adverts for books critical of Samsung. However, above is the true nature of Samsung. In addition, Samsung is criticised for illegally using position-tracking capabilities of the mobile phones' of their former and present workers; drawing up an employment contract as bad as slave labour, specifically with migrant workers; avoiding the regulations relating to work injuries; employing every expedient for passing on the management rights to the president's son; etc. There would be no end if I try to go into all this. The Republic of Korea is often called as the Samsung Republic in satire.

War industry

According to the list of the top 100 arms-producing companies, in 2009 in the Stockholm International Peace Research Institute (SIPRI) Yearbook 2011, Samsung came in 58th. In particular, among many subsidiary companies of Samsung, Samsung Techwin is responsible for the vast majority of sales of military supplies, and war materials represent 45% of their worldwide sales. It is 1% of total sales of the Samsung Group.

Samsumg Techwin is a major military industry in South Korea, producing mainly K55, K9 self-propelled gun Thunder, artillery weaponry including K-77 Fire Direction Centre Vehicles, other ground combat equipment such as combat mobile vehicles, Korea Amphibious Assault Vehicle and engines for a F16 fighter and helicopter. They have sold K9 Thunder to Turkey and have been subjected to a flood of criticism for supporting Turkey's brutal treatment of the Kurdish population.

Now Samsung is one of the constructor of the Jeju naval base. Besides, Samsung is said to control the economy of Jeju island. The Jeju media reported that the Jeju Island government had made contract for partnership with Samsung C & T to achieve export of 1trillion won on Jan. 21, 2011. It reported that the Jeju Island and Samsung made contact to collaborate on scouting for bright export goods, supporting for foreign marketing and inheriting on export know-how for the Jeju Island government officers. This, in turn, small and medium-sized businesses in Jeju island will economically subordinate to Samsung and the gap between the rich and the poor wil widening. Because, as always, they only care about the profit, not the people.

There has been anti-Samsung campaigns occasionally, especially when the problems of Samsung have surfaced in South Korea but so far there were not very successful . People used to say it's like you're banging your head against a brick wall, or we can not live without Samsung. Yes, Samsung is that giant but it is said constant dropping will wear the stone. Now is time for action!

http://www.crocodyl.org/wiki/samsung_group
http://nobasestorieskorea.blogspot.com/2011/02/jeju-update-samsung-worke...
http://www.samsung.com