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Internal corruption scandal angers Samsung Group chairman

Internal corruption scandal angers Samsung Group chairman

Posted June. 09, 2011 05:46,   


Samsung Group Chairman Lee Kun-hee has urged reinforcement of his conglomerate`s auditing functions in the aftermath of a corruption scandal at Samsung Techwin over which the company`s CEO resigned.

In a weekly meeting of affiliate presidents Wednesday at group headquarters, Kim Sun-taek, head of the group`s future strategy team said, “Chairman Lee harshly criticized the marring of the previously unblemished image of Samsung’s organizational culture.”

Samsung Techwin CEO Oh Chang-suk offered to resign just before the meeting started and was thus absent. His was the first resignation of a Samsung CEO due to internal corruption.

The scandal is known to be related to Samsung Techwin`s suppliers.

After being briefed on the results of the group’s internal audit of Samsung Techwin Tuesday, Lee said, “Global companies have been forced out of markets due to internal corruption and complacency. Samsung can be no exception. All group members must realize the magnitude of problems that could arise should they commit fraud.”

The chairman is known to have shown his biggest outpouring of anger since April, when he began going to group headquarters every Tuesday and Thursday.

Details of the scandal remained unknown, with nobody in Samsung Techwin except Oh aware of the causes. The company will hold a temporary shareholders’ meeting in two months to announce what happened and name a new CEO.

Lee Yin-yong, head of the group’s communication team, said, “The unblemished image of Samsung’s organizational culture has been marred. Though scandal might not be against social norms, it is definitely a problem for Samsung.”

“President Oh is not directly implicated and the scandal also doesn`t involve K-9 howitzers that Samsung Techwin supplies to the Defense Ministry.”

Interest is circulating on what kind of corruption Samsung Techwin committed and how the chairman`s anger will impact the group.

Many blame the scandal on defense supplies. Samsung says the matter is an internal one and considers taking bribes from suppliers taboo.

Chairman Lee has often said, “A fraudulent company cannot make good products, and even if it makes good products, consumers will ignore them.”

His late father and Samsung Group founder Lee Byung-chull also said, “Those who make mistakes while trying to do good work can be forgiven, but committing corrupt activities for self-interest cannot be tolerated.”

Even Samsung suppliers are known to say the group can behave harshly but never receives bribes.

The Samsung chairman is known to have ordered his group to strengthen its auditing functions, calling a good audit without punishment "no good." He also said auditors should be promoted to higher positions while urging the hiring of higher-caliber personnel as auditors.

Chairman Lee said the auditing units of affiliates, which are under the group’s corporate strategy office and headed by a vice president or senior vice president, should be completely separate from the rest of the company.