Samsung chief stands down; sorry for tax scandal

By Jon Herskovitz

SEOUL (Reuters) - South Korea's most powerful businessman said on Tuesday he would step down after 20 years at the head of the giant Samsung Group following his indictment last week for tax evasion and breach of trust.

The televised announcement by Lee Kun-hee, 66, who has achieved almost heroic status in South Korea for his role in the fortunes of Samsung, came as a shock even in a society long used to its top businessmen being hauled into court.

But analysts pointed out Lee and his family still control the country's largest conglomerate, sometimes dubbed the "Republic of Samsung" and whose dozens of affiliates account for around a fifth of South Korea's exports. Its products and services range from computer chips and hospitals to handphones and supertankers.

"(I) deeply apologise for causing concern to the nation and will take full responsibility for that," an expressionless Lee said in a brief statement while dozens of senior group executives standing behind him watched on.

The group will dismantle its powerful strategic planning office, which critics say is an opaque organization able to wield influence across some 60 affiliates, including flagship company Samsung Electronics, a world leader in computer memory chips and flat display screens.

"I don't see anything more than a change of people in charge. There's no change at all in the fact that (the Lee family) will remain the owner," said Citibank economist Oh Suk-tae.

A Samsung spokesman told reporters the reshuffle was the start of a process that would give its companies more transparency, its management more autonomy and end a complicated cross-shareholding arrangement that gives Lee enormous power despite holding a tiny stake in group companies.

Lee's son, Lee Jae-yong, seen as being groomed to take over, will step down from his executive post and work abroad for the group in another, unspecified role.

Four other top executives also quit, including the head of the group's strategic division and the CEOs of Samsung Fire & Marine Insurance Co Ltd and Samsung Securities Co Ltd

Shares in affiliates such as Samsung Securities and Samsung Construction & Trading fell 4-8 percent on the news.

Samsung group firms account for 20 percent of total market capitalization on the main board of the South Korean bourse The group has more than 250,000 employees and its annual revenues of $160 billion are around the size of Singapore's GDP.

NO BANKING

Addressing two key issues, Samsung said it would not move into the banking sector, nor would it set up a holding company.

There has been widespread speculation that once the government eases restrictions, the major family-run "chaebol", or conglomerates, would snap up local banks.

"Expectations about a holding company transformation vanished, which sent shares (at some Samsung units) lower," said Chang In-whan, CEO of KTB Asset Management.