Tuesday morning, I had just arrived back at my office when the phone rang. A familiar British blurted, “So what’s your take on Lee Kun Hee?” Taken back, I mumbled I wasn’t clear on what the lad was on about. But I recognized him to be a reporter, so I played along. He responded, “You better sit down for this...” He then told me about. Though I was sitting when I answered the phone, I was in my chair by the story’s completion.

Being a staunched believer in Guerrilla Marketing (which in my mind is paying as little money as possible for promotion), I realized I had a special opportunity to get my firm’s name into the press. Desperately, stammering about as I interacted with the reporter, I knew I had to immediately come up with some zinger of a quote. Got it! With my best composed baritone voice, I solemnly pronounced into my phone, “This marks the end to the era of the Masters of the Universe.”

I had a lot more to say, which would have put the statement into context. But, only the zinger made it into the media. Ironically, a half week before, I was in Bloomberg Korea’s office to be interviewed for their television network. I mentioned to one of the senior reporters that I expected Chairman Lee to get a slap on the wrist, since the investigation had started during the previous presidential administration. But given Pres. Lee Myung-bak’s visit to New York and Washington, I suggested MB Lee would more vigorously punish like criminals in the future.

So, when I considered what had happened on Tuesday, the biggest variable between that event and similar, previous events was the change in government. My first reaction was, “Dang! MB Lee really is serious about turning this economy around!” When it became clear, however, that none of the Lee family would be trading in their equity and their de facto control of the chaebol, my response was, “Hmmm....”

All of which reminded me of some my earlier Korean business experiences. For about almost a decade I worked with a Western high tech firm that largely depended on a family-run company for most of its Korean sales. What was fascinating was in spite of a two-decade-old relationship, we rarely talked with our distributor’s real decision-makers. Especially in the end, the owner who made all the strategic decision was never in sight or even in direct communication. He rarely even came to the office. The closest we got was by dealing with his young daughter who had been made CEO and only through her could we communicate to the real decision-maker.

Those experiences seem to comprise a potential micro example of what we see unfurling before us. Chairman Lee is “retiring,” his heir and son, Lee Jae Young, will soon be reassigned overseas, and so on.

Compared to the other chaebol, Samsung is probably the best run in terms of the business units being relatively independent of each other. The operative word, of course, is “relatively.” All chaebol possess corporate cultures that are autocratic, with top-down orders rarely being challenged. For some chaebol, even a feigned departure by key family members could spell chaos. But in the case of Samsung, I’m relatively sanguine that the new order of the day with the Lee family stepping into the discreet shadows will not have a big impact on their business conglomerate.

The open question is how significant was April 22nd? Chairman Lee took the fall on behalf of his executives, which was good for both them and the country, since the long-term benefit of prosecuting those executives, who were acting on orders, would have been nil. So things may not seriously change at Samsung. Even with the Strategic Planning Office being eliminated; none of us yet know whether the Samsung companies -- by design or accident -- will begin acting more independently than the past. It could be more difficult, however, for the Samsung companies to bail each other out.

For example, a Seoul court ruled on January 31st in favor of Samsung Motor’s creditors. Even after Renault saving the company in 1999, massive bank debt remained unpaid. Chairman Lee offered 3.5m of his own shares in Samsung Life, which was expected soon to list. The 14 major creditors, however, were still waiting for that to happen so they may redeem what was essentially worthless paper. The court ordered Samsung to sell off 2.3m shares of Samsung Life to pay off some of the debt.

Perhaps whether this kind of intramural financing becomes more difficult or not will largely suggest how much of a real change has taken place.

And if the bribery scandal and lesser reported financial struggles are not enough, last December’s Taean oil spill by a Samsung Heavy Industries’ tug collusion with an oil tanker has done nothing for the chaebol’s PR. Samsung’s domestic reputation has hit a nadir.

So Samsung appears to be on the ropes. But, is it really?

In spite of my zinger of a quote, it may be too early to write off Korea’s Masters of the Universe. They have rebound in the past and they have the means, given enough time, to do it again. We will have to wait and see.

April 28, 2008