Samsung Board Chairman Jailed on Union Sabotage Charge

(Bloomberg) -- Samsung Electronics Co. Board Chairman Lee Sang-hoon was sentenced to 18 months in prison on Tuesday after being found guilty of obstructing the formation of the company’s labor union, according to the Seoul Central District Court.

Lee was charged with leading an operation to sabotage a newly formed labor group at Samsung’s customer-service unit in 2013 when he was chief financial officer. Samsung’s executive vice president Kang Kyung-hoon was also sentenced to 18 months for violating the country’s labor law.

Dozens of current and former employees at Samsung units were also convicted on charges of illegally cracking down on union activities. Some were sentenced to prison while others received suspended jail terms or ordered to pay fines.

“We humbly accept that the companies’ understanding and view toward labor unions in the past fell short of society’s expectations,” Samsung Electronics and Samsung C&T said in a joint statement. “We will endeavor to build a forward-looking and productive labor management relationship based on the respect for our employees.”

Rigorous Scrutiny

While the board chairman has limited role in the day-to-day operations of the world’s biggest manufacturer of smartphones and memory chips, the sentencing is another blow to top management at South Korea’s biggest company. Jay Y. Lee, the company’s vice chairman and de facto leader, ceded his board seat in October as he fights bribery charges that could land him back in jail.

But the heir apparent is still running the tech giant while on trial and the imprisonment of the chairman may complicate Samsung’s plans to shift more authority to the board. Samsung has yet to announce its annual executive reshuffle that usually takes place in early December.

The Seoul-based company could face more rigorous scrutiny from investment funds focused on environmental, social and corporate governance issues in the wake of the sentencing, according to Bloomberg Intelligence analyst Masahiro Wakasugi.

Samsung Electronics’ shares were little changed as of mid-morning Wednesday.

--With assistance from Jihye Lee.

To contact the reporters on this story: Sohee Kim in Seoul at skim847@bloomberg.net;Stephen Stapczynski in Singapore at sstapczynsk1@bloomberg.net

To contact the editors responsible for this story: Ramsey Al-Rikabi at ralrikabi@bloomberg.net, Peter Pae

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