Samsung disbands its control tower, government relations

Korea's biggest conglomerate will shake up its governing structure as an act of taking responsibility for its involvement in the recent corruption scandal

Samsung Group on Tuesday announced it will disband its controversial control tower Corporate Strategy Office as part of taking responsibility for its disgraceful involvement in a corruption scandal that led to an impeachment trial of President Park Geun-hye and arrest of the group's de facto leader Lee Jae-young.

The announcement was made after the special counsel wrapped up its 70-day investigation into the scandal on the same day as it failed to win acting President Hwang Kyo-ahn's approval for an extension.

According to the announcement, the group will shut down the Corporate Strategy Office better known as the future strategy office, and its chief Vice Chairman Choi Gee-sung, President Chang Choong-ki and about 60 other executives will resign from their posts.

The ‘female Rasputin’ at centre of S Korean President Park Geun-Hye political scandal

  • South Korean President Park Geun-Hye is facing calls to resign over allegations she allowed a close personal friend to meddle in state affairs.
  • People watch a television news report showing South Korean President Park Geun-Hye making a public apology, at a railway station in Seoul on October 25, 2016.
  • South Korean President Park Geun-hye bows after releasing a statement of apology to the public during a news conference at the Presidential Blue House in Seoul, South Korea, October 25, 2016.
  • South Korea’s presidential office said on Saturday it was cooperating with prosecutors’investigation into key aides to President Park Geun-hye over allegations an old friend of hers enjoyed inappropriate influence over her.
  • Prosecutors’ request for presidential Blue House documents came ahead of an evening protest expected to draw thousands in central Seoul calling for Park’s resignation amid a scandal that has cast her presidency into crisis.
  • A woman attends a protest denouncing President Park Geun-hye over a recent influence-peddling scandal in central Seoul
  • Protestors hang a caricature showing South Korean President Park Geun-Hye (L) and her confidante Choi Soon-Sil (C), on a board during a rally denouncing a scandal over President Park's aide in Seoul on October 27, 2016.
  • South Korean prosecutors on October 27 set up a high-powered "task-force" to probe a widening scandal involving alleged influence-peddling by a close confidante of President Park Geun-Hye. Choi Soon-Sil, an enigmatic woman with no government position, was already part of an investigation into allegations that she used her relationship with the president to strong-arm conglomerates into multi-million dollar donations to two non-profit foundations.
  • Park’s office said late on Friday she had ordered her senior secretaries to tender their resignations, and she will reshuffle the office in the near future. Her chief of staff separately offered to resign earlier, the office said.
  • The deepening crisis over allegations that Park’s friend, Choi Soon-sil, enjoyed inappropriate influence over her has sent her public support to an all-time low, with more than 40 percent in an opinion poll saying Park should resign or be impeached.

The group-led meeting of CEOs of Samsung subsidiaries will also be abolished, giving each subsidiary autonomy to operate centering on their boards of directors, the announcement said.

The group also pledged to disband Samsung's government relations division to amid its alleged role of lobbying public offices including the parliament, central government and municipalities.

Samsung would delegate such activities to local law firms, cutting its direct links to government offices, according to local reports quoting insiders.

The group has been facing public criticism that the group may have maintained its cosy relationship with politicians and officials in exchange for business favorus and policy support.

Read Also: Samsung heir's prison life: 7 hours of TV on an LG screen, $1.75 meals

Samsung, however, had denied the reports, calling them "groundless."

After the control tower is dissolved, around 200 rank-and-file workers and executives there are expected to return to Samsung's units where they originally belonged.

As part of the reform plan, Samsung also pledged to require approval from each affiliates' boards or umbrella committees in executing external donations above a certain amount.

Park Sang-jin, president of Samsung Electronics, tendered his resignation from the corporate post as well as the president of the Korea Equestrian Federation, the group also said.

Read Also: Samsung heir indicted for bribery, embezzlement: Prosecutors

Samsung executives and employees who have been dispatched to the KEF will also return soon.

The group, however, did not mention about abolishment of the annual recruitment that has been led by the group.

It was expected that the annual recruitment would also be abolished, leaving such a role to affiliates ranging from manufacturing tech devices to biopharma products.

There were also media speculations that the reform package would include the return of Samsung Group Chairman Lee Kun-hee's 1 trillion won ($1.3 billion) fund that he had promised to give back to society to appease public anger over the 2008 slush fund scandal.

Read Also: Samsung's top brass grilled over Choi scandal

His son, Lee Jae-yong, had said in December that he would discuss the fate of the fund with his family since the chairman has been bedridden after he suffered a heart attack in 2014.

It was also said the group was considering to offer an additional donation to placate public criticism over allegations that a 2015 merger between Samsung C&T and Cheil Industries had inflicted financial damage to minority shareholders of the construction arm of the group and the National Pension Service.