business ethics

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Case Studies – Choose ONE for Task 2

1. Samsung boss' retrial for bribery charges begins

The retrial of Samsung Group's de facto leader for bribery charges started in South

Korea on Friday.

Samsung Electronics vice chairman, JY Lee, appeared at an appellate court in Seoul

and said to reporters "he wanted to apologise for causing worries" before entering to

attend the first hearing for the trial. He made no further comments.

It's his first court appearance in nearly two years since he was freed from prison in

early 2018.

Charges against Lee for bribery arose during a national scandal in 2016 that involved

the then-South Korean President, Park Geun-hye, who was accused of abusing her

power and receiving bribes from conglomerates via a close aide. She was eventually

impeached and jailed.

The Samsung boss and executives of the company were accused of giving bribes in

the form of money and horses to Park's aide in return for government support for a

controversial merger of two business group affiliates.

In August, South Korea's top court found that the appellate court had wrongly

dismissed the bribery charges against Lee that were in relation to Samsung giving

three horses to the now ousted Park's confidant Choi Soon-sil. The top court then

ordered a retrial of the bribery charges.

Following the order, the South Korean tech giant issued a rare statement, saying it

"deeply regrets that this case has created concerns across the society. We will renew

our commitment to carrying out the role of a responsible corporate citizen and will

avoid a recurrence of past mistakes."

Due to the Supreme Court's decision, Lee could potentially face a heavier sentence

than previously due to an increase in the total monetary value of what is deemed as a

bribe under criminal law.

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The Samsung boss was arrested back in 2017. He was initially found guilty and

sentenced to five years in prison at the district court, but in 2018, he was freed by an

appellate court as it did not accept the validity of some pieces of evidence which led

to Lee receiving a suspended sentence instead.

Since leaving prison, Lee has been busy making "big moves" and large investment

decisions. In July, he visited Tokyo to meet with Japanese business leaders

amid rising trade tensions between South Korea and Japan over past historical

conflict.

Samsung Electronics announced in late 2018 that it would invest $22 billion into AI

and 5G by 2020. Meanwhile, Samsung Display earlier this month announced that it

had plans to invest $11 billion in to QD displays by 2025.

Prior to his sentencing, Lee had been leading the conglomerate since 2014 after his

father and Samsung patriarch, chairman Lee Kun-hee, suffered a heart attack and

was hospitalised.

2. Kobe Steel, Mitsubishi Materials, and Japan’s Corporate

Governance Woes

Japan’s economy notched its longest GDP growth streak since 2001 in the third

quarter of 2017. But underlying it’s steady recovery: A wave of quality-faking

admissions from some of Japan’s biggest companies that’s has raised questions

about the country’s standing as a manufacturing powerhouse .

In October, Kobe Steel revealed that it falsified information on some items sold

to Boeing, Ford, Toyota, and others since 2007; Mitsubishi Materials, which said

it faked data on auto and airplane parts affecting some 274 clients; and Toray,

a manufacturing giant that revealed that it had fudged data for cords used to

reinforce tires since 2008.

Carmakers Nissan and Subaru also recalled 1.2 million and 395,000 vehicles

respectively in 2017, saying unqualified inspectors were allowed to vet their cars

in the final checks for decades.

While the scandals haven’t revealed any major safety issues, they are negative

for Japanese businesses. As lower cost alternatives from China and South

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Korea have proliferated through the market, Japan has competed mainly by

pointing to the high quality of its products as a bulwark.

Analysts, though, say the series of scandals that have come out in recent months

suggest that those Japanese quality standards may have been set too high .

3. Equifax’s Data Breaches

Credit rating firm Equifax makes its profits from selling personal, often sensitive

information to financial institutions and lenders.

But in September, it revealed that it had been at the centre of one of the worst

data breaches in history, with the information of some 145 million people, about

half of the U.S. population, compromised.

In the aftermath, CEO Richard Smith stepped down, as well as its chief

information officer and chief security officer, amid revelations that Equifax was

aware of the system flaw that the hackers took advantage of since March. The n,

when the hack did happen, the firm waited a full two months before disclosing

it.

Meanwhile, the Justice Department is reportedly looking into whether top

Equifax executives committed insider trading when selling some $1.8 billion in

shares just before the breach was disclosed.

4. Uber, Uber, and More Uber

If Uber’s past run-ins with the law were speed bumps, then 2017 hit the ride-

hailing company like a 10-car pileup, with sexual harassment allegations,

questions about founder Travis Kalanick’s leadership, and criminal probes. In

February, former Uber employee Susan Fowler came forward alleging a culture

of sexual harassment in the Silicon Valley giant. In May, the Justice Department

revealed a criminal probe into Uber’s alleged use of a software dubbed

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“Greyball” to avoid regulators in geographic regions where it was operating

illegally. That all helped lead to the ouster of Kalanick in June, giving then -

Expedia CEO Dara Khosrowshahi the unenviable task of reforming the firm.

What made it seem like even more of a Sisyphean ordeal: Shortly after

Khosrowshahi took the reins, London banned Uber from the U.K. capital, and in

November, it was revealed that Uber had been hacked, putting the data of

some 57 million users in danger.

Unlike in the case of United Airlines, Uber’s users have chosen alternatives to

the black cars. Due to its ongoing woes, Uber has ceded part of its market share

to Lyft, now controlling 74% of the U.S. market against 84% last year.

Uber once had a valuation of about $68 billion. Japanese banking firm SoftBank

meanwhile bought a stake in the company valuing it at $48 billion.

5. Alphabet and Facebook

The year following the presidential election became one for Congress — and

internet titans — to rethink their role in the democratic process .

Amid speculation that fake news spread on social media may have influenced

the 2016 elections, giants such as Facebook and Google appeared to dismiss

the possibility.

But that changed in 2017, with Facebook and Google — which derive a major

chunk of their revenue from ad placements — both saying that they had found

accounts tied to the Russian government. Facebook reported some 3,000

Kremlin-linked ads aimed at dividing the country that had been bought on its

platform. Google, meanwhile, found tens of thousands of ads bought by Russia-

linked entities on YouTube and Gmail. Twitter also revealed that a news outlet

paid for by the Russian government, Russia Today, had spent $274,000 in ads

on the platform in 2016.

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There’s no indication that the questions will stop any time soon. Twitter,

Facebook, and Google are still investigating how much Russian activity there

had been on their platforms. Adding to big tech’s big probl ems: Congress

appears to be taking a harder stance against the sector, with some on Capitol

Hill questioning the way they are getting users to keep coming back.

6. Wells Fargo’s Woes Continue

After losing the trust of consumers in 2016 for creating millions of fake

accounts, Wells Fargo struggled mightily to win back its customer base with

promises of transparency and reform.

But Wells Fargo’s woes only deepened in 2017, when the company admitted

that it had charged as many as 570,000 consumers for auto insurance that they

did not need. Additionally, some 20,000 of those borrowers may have had their

cars repossessed as a result. Wells Fargo said it would pay $80 million in

remediation. Wells Fargo’s head of consumer banking and some 70 senior

managers in the bank’s retail banking segment were also cut as a result.

In the same year, Wells Fargo also revealed that it had uncovered an

additional 1.4 million fake accounts on top of the 2.1 million the bank previously

disclosed had been created without consumer permission.

7. Apple’s Slowed Down iPhones

The tech giant’s year ended with a bang, after reports that Apple had

purposely slowed down older iPhones to compensate for decaying batteries.

It appeared to feed into a long-time conspiracy theory among some Apple

users: that the company had been purposely slowing down old models when a

new version came out in a bid to force consumers to upgrade. Now, the

company is facing lawsuits for allegedly slowing down the devices without first

warning consumers.

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In response, Apple has apologized for slowing down the iPhones, calling it a

“misunderstanding,” and offered to sell battery replacements for $29 instead of

the usual $79. Apple has said that once the battery is replaced, the iPhone’s

speed will pick up again.

8. Samsung’s Bribery Charges

In 2016, Samsung dealt with exploding Note 7 batteries. In 2017, it was

imploding corporate ranks.

Originally planning to put heir Lee Jae-yong at the head of the empire, the family-

run Samsung conglomerate is now facing questions of succession after Lee was

caught in a sprawling political scandal that took down former South Korean

President Park Guen-hye.

Lee Jae-yong is now facing five years (and potentially 12) in jail for offering

allegedly offering bribes to Park, embezzlement, and hiding assets overseas.

Samsung Electronics co-CEO Kwon Oh-hyun meanwhile also resigned in

October, citing Samsung’s leadership woes.

“As we are confronted with unprecedented crisis inside out, I believe that time

has now come for the company [to] start anew, with a new spirit and young

leadership to better respond to challenges arising from the rapidly changing IT

industry,” he said in a statement.

While Samsung’s long-term health is still on shaky ground, the company’s near -

term outlook belies those worries. The company posted record -breaking profits

in the third quarter of $12.8 billion, almost triple the number it post ed a year

earlier.

Source: 10 Biggest Corporate Scandals, https://fortune.com/2017/12/31/biggest- corporate-scandals-misconduct-2017-pr/ [accessed on 22/02/2021].