Saturday, February 16, 2013
Samsung: Embezzlement Scandal (2009)
Samsung: 2009 Embezzlement Scandal
Based on Paper by Ahmed Ibrahim
By Joshua Concepcion
“Samsung Electronics Co., Ltd. is the chief subsidiary of South Korea's giant Samsung Group and the largest electronics producer in Asia. Samsung Electronics operates four main divisions including Digital Media, Semiconductors, Information & Communications, and Home Appliances. The company sells televisions, video, and audio equipment; computers and related products; phones, cellular phones, and fax machines; home appliances; semiconductors; network-related products; factory automation products; fiber optics products; closed circuit security products; motors and compressors; and solar energy systems.” (Reference for business) I will be discussing an ethical controversy that was caused by Chairman Kim Seung-Youn. Then relate those ethical controversies to four major theories, Individualism (Friedman’s Economic Theory), Utilitarianism, Kantianism, and Virtue Theory.
The ethical controversy caused by Chairman Kim Seung-Youn is that Kim was found guilty of insider trading of company stocks. Kim was accused of embezzling eighty one million dollars’ worth of company funds. The Korean stock exchange then reviewed the situation then came up wit the following implementation. “On Friday, February 3, 2012, the Korean Stock Exchange warned that it might suspend Hanwha’s shares from trading. However, on Sunday, February 5, the exchange decided not to suspend or de-list Hanwha’s shares, ruling that taking such an action against a company that is valued at $2.6 billion would have an adverse effect on the exchange.” (Flannery) The prosecutors were looking for a period jail term of nine years. The South Korean government is notorious for being light on executive frauds such as these sending them to jail for only four to seven years. “South Korean judges typically allowed convicted executives to remain out of jail pending the appeals process. In this case right after the hearing occurred Kim was sent directly to jail” (Ramstad) The official statement read “Prosecutors sought a nine-year prison sentence, one of the longest allowed under Korean embezzlement laws. In addition to the four years in prison, the court fined Mr. Kim about $4.5 million.” (Ramstad)
Kim Seung-Youn said he was going to pay back the debts of smaller companies he owned under different names. In sort an attempt to launder the money so it would be harder to trace and eventually come back to Kim. Top company executives believed they could bounce back from this enormous problem with an increase on internal controls of sensitive material, and improve their managerial training. There are many stakeholders in this controversy, the biggest being the customers. The customers want to trust that their money is going towards the company, and not directly into the pockets of an individual. The employees of the company, these individuals got robbed the revenue that could have potentially been spread as bonuses or other areas of the company. The stockholders, since there was a robbery of revenue the dividends the stockholders received was dramatically lower, this is basically stealing money out of people’s pockets.
I will now go into detail about how this ethical controversy relates to four ethical theories: Freidman's Individualism, Utilitarianism, and Kantianism. According to Friedman’s individualism the only goal of business is to profit. So the only obligation that the business person has is to maximize profit for the owner or the stakeholders. In this scenario, a Chairman is stealing the company’s revenue directly the opposite of what this theory suggests. This hurts the company in all aspects, hurts the end of the year revenue, hurts the image the company is trying to convey, hurts stockholders, everything that eventually impacts the revenue the company will receive. According to utilitarianism happiness or pleasure are the only things of intrinsic value. Technically speaking on the individual level, all the money that Kim stole did bring him happiness. On the company wide level he stole the money that could have been spread around to make even more people happy. So depending on how you look at the situation, it can be played out both ways. In my opinion it’s still a show of greed and he should have spread that money around for the happiness of the company and everyone in association. For all the stakeholders: customers, employees, and stakeholders all of them feel the same way about this situation. They all have extremely negative happiness toward the situation, for all the stakeholder involved they are losing money. According to Kantianism the basic principles are to act rationally, be consistent in your action. Allow and help people make rational decisions, give respect for everyone and their rights to be an individual. Be motivated by good will; let good will drive your actions to do what is right. The biggest piece of Kantianism is to be motivated by good will; Chairmen Kim was motivated by greed. Greed drove him to steal money from the company, and unless he was always stealing money from his company he did not follow the principles of Kantianism. Samsung has always had a history controversy where they get in trouble for skimming money off the top, so you could say that yes Samsung is consistent in their errors, still this is not rational. People should not want to steal and ruin people's lives, for their own self situation. For virtue theory, a business should close these virtues close: trust, temperance/self-control, empathy, justice/fairness, honesty, learning, gratitude, civility, moral leadership. Of all the theories, Chairmen Kim fails in every area in virtue theory. Kim failed by letting the trust that his employees and stockholders put in him when he gained that position in the company. Kim showed lack of leadership, honesty, self-control, fairness, every single category by letting the greed and the temptation of embezzling the money. Kim failed in his responsibilities as a leader of the company, he was chosen to have the insight to lead the company to profit instead he fails his leadership duties by stealing money. Kim failed in his honesty by attempting to cover up his actions, just like every criminal their goal is to get away freely thankfully for Samsung they found out his plans. In terms of self-control and fairness Kim has failed his company but mostly himself, because being in a position of power an individual has to have the insight to control himself and make the correct decisions for the well being of everybody.
Thanks for taking the time to read, have a great day!
Ibrahim, Ahmed. "Samsung PH 211." Diss. Western New England University, 2012. Print.
Flannery, Nathaniel Parish. "How the Latest Scandal at Explosives-Maker Hanwha Highlights Broader
Investment Risks at Major Korean Companies." . Forbes, 10 02 2012. Web. 16 Feb 2013.
Ramstad, Evan. "Hanwha Chief Quickly Jailed ." The Wall Street Journal. The Wall Street Journal, 16 08
2012. Web. 16 Feb 2013. <http://online.wsj.com/article
Reference for Business, . "Samsung Electronics Co. Ltd.." Copyright © 2013 Advameg, Inc. . Reference for Business. Web. 16 Feb 2013. <http://www.referenceforbusiness.com/history2/16/Samsung-Electronics-Co-Ltd.html>.
Salazar, Heather. "The Ethical Theory of Individualism." Western New England University. Massachusetts, Springfield. 01 2012. Lecture.
Salazar, Heather. "Utilitarianism and Business Ethics." Western New England University. Massachusetts, Springfield. 01 2012. Lecture.
Salazar, Heather. "Kantian Business Ethics." Western New England University. Massachusetts, Springfield. 01 2012. Lecture.
Salazar, Heather. "Business Ethics and Virtue." Western New England University. Massachusetts, Springfield. 01 2012. Lecture.
Images taken from Google Images