Samsung's Message to Employees: Keep Calm and Carry On

By Eun-Young Jeong Features Dow Jones Newswires

Samsung Electronics Co.'s chief executive urged his employees to stay focused on their work following last week's conviction of Samsung's de facto leader, and punctuated that business-as-usual appeal with a fresh $2.3 billion investment in semiconductors.

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The dual moves on Monday appeared intended to send a message of steadiness and continuity as Samsung, one of the world's biggest technology companies, navigates a precarious period.

The Korean-language message from Samsung Electronics' chief executive, Kwon Oh-hyun, which urged employees to continue to work hard and not be distracted, came just three days after a Seoul court sentenced Lee Jae-yong, the company's vice chairman and the Samsung heir, to five years in prison for bribing South Korea's former president.

The verdict has rocked South Korea, reflecting a new rigor in scrutinizing the traditionally close ties between government and the powerful family-run conglomerates known as chaebols.

On Monday, Mr. Lee's lawyers filed an appeal contesting Friday's court verdict, as expected.

The brief memo from Mr. Kwon was the first companywide message since Mr. Lee's conviction, which if upheld on appeal would prolong the company's leadership vacuum.

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In the memo, which was posted on the company's internal web bulletin board and reviewed by The Wall Street Journal, Mr. Kwon described Mr. Lee's imprisonment as an "unprecedented challenge" and encouraged staff to continue working hard as they wait for "the truth to come to light."

Mr. Kwon seemed to do just that hours later, when Samsung said its management committee had approved a $2.3 billion investment to boost its NAND memory-chip facilities in Xi'an, China, part of a new, three-year $7 billion investment plan, according to a filing with regulators. NAND chips are memory chips that dictate the amount of data that can be stored in digital devices.

Mr. Kwon, one of three co-chief executives at Samsung Electronics, has been a steadying force behind the scenes since Mr. Lee was detained in February, according to people familiar with the matter.

The company, the world's largest maker of smartphones, memory chips and televisions, has continued to fare well even amid the continuing legal process. Samsung shares are trading near an all-time high as the company posts record quarterly profits.

But Mr. Lee, the 49-year-old only son of Samsung Chairman Lee Kun-hee, is seen as playing a critical role in approving Samsung's biggest investments and deals.

Monday's announcement seemed designed to send a sign that the company will continue to conduct business as usual despite Mr. Lee's absence.

A Samsung spokeswoman declined to comment on Mr. Kwon's internal memo, but said that Samsung Electronics, led by its three co-CEOs, would endeavor to carry out operations without disruptions from the continuing legal process.

Mr. Lee was found guilty on Friday of offering $7.9 million as bribes to entities linked to Choi Soon-sil, a friend of South Korea's former President Park Geun-hye. In return for the financial contribution, the court found that Ms. Choi colluded with Ms. Park to provide government backing for business deals relating to Mr. Lee's succession over Samsung.

Along with bribery, Mr. Lee was also convicted of embezzlement, hiding assets abroad, concealing criminal profits and perjury. He has been detained in the same facility where he was held under custody since February while undergoing trial.

Ms. Park and Ms. Choi have both denied wrongdoing and are facing charges in a separate trial.

Investors reacted negatively to Mr. Lee's sentencing. Samsung Electronics' shares fell 2% in Monday trading, far steeper than the broader benchmark's 0.3% decline. Shares in other Samsung affiliates seen as key pieces of Mr. Lee's planned succession process, such as de facto holding company Samsung C&T Corp. and Samsung Life Insurance Co., fell 3.4% and 2.9% respectively.

Timothy W. Martin contributed to this article.

Write to Eun-Young Jeong at Eun-Young.Jeong@wsj.com

(END) Dow Jones Newswires

August 28, 2017 08:29 ET (12:29 GMT)