There were two major events this week that surprised many people watching South Korea, myself included. First, a South Korean novelist won the Nobel Prize in Literature for the first time in the country's history, marking only the second time the country has won a Nobel Prize in any field.
Her fans, fellow citizens and the whole world joined together in congratulating the novelist, Han Kang, on being awarded the world’s most prestigious literary prize. Of course, I was among them, but her glorious achievement has nothing to do with the subject of this column.
It is the other shocking event to which I am about to dedicate this column. It was an official apology issued by Samsung Electronics Vice Chairman Jun Young-hyun for the company's disappointing quarterly earnings performance a couple of days before the Swedish Academy announced the winner of this year’s Nobel Prize in Literature.
When I first saw news reports from a few media outlets that a senior executive of the South Korean technology giant had apologized to the public over earnings performance, I thought it must be a joke, an unfounded rumor, or at best an informal apology made to express condolences to its employees.
I was completely wrong -- a vice chairman of the company had indeed issued a statement apologizing for an earnings performance that fell short of the market’s expectations. He said it caused customers, investors and employees to worry about the company’s fundamental technological competitiveness and even the company’s future.
The apology came soon after Samsung, the world's largest maker of memory chips, smartphones and TVs, released its official estimate of an operating profit of 9.1 trillion won ($6.73 billion) for the third quarter. It was a hefty haul, but below market expectations of more than 10 trillion won in profit.
The company, which will break down earnings details by business division later this month, reportedly said its artificial intelligence chip business with a major customer was hit by a delay, while rival chip makers in China increased supplies of conventional chips, both contributing to the decline in its earnings in the overall semiconductor sector.
There has been growing concern about the long-term prospects for the company amid intensifying competition in key business sectors, sandwiched between fast-growing Chinese companies and ever-strengthening Big Tech companies mostly in the United States.
These concerns have forced the share price of Samsung, which has about a 20 percent weighting on the Seoul stock market’s benchmark Kospi, to fall 24 percent so far this year. It was far worse than the 2.9 percent drop on the Kospi over the same period, not to mention the stellar performance of share prices in Big Tech companies.
The executive acknowledged that many people have spoken of a crisis for Samsung Electronics.
While saying that responsibility for the troubles lies with the management leading the company, the vice chairman pledged that Samsung will restore its competitiveness in fundamental technologies, prepare for the future more thoroughly and fix any problems in its culture and ways of working.
The rare apology, however, has so far failed to bring about any sharp change in the picture, as Samsung’s share prices fell further. This indicates that the apology and promises of change were not strong enough to persuade investors to stop selling shares and bet on the company’s rebound.
Or, in the case of Samsung, an apology may not be what was needed.
Usually, a formal apology can have a number of positive effects when something goes wrong, such as helping restore trust and reputation, humanizing the apologizing subject, mitigating backlash and laying the foundation for opportunities to reconcile with those in conflict.
An apology is effective when it is timely, reveals the sources of problems and is accompanied by corrective actions. But investors may have felt that the apology was not effective in this sense or was not what they wanted to hear from the company’s management about the problems it faces.
In principle, I am not sure whether a company’s earnings figures for a very short period are something that a senior executive needs to apologize for. Moreover, Samsung did not post a big loss during the third quarter but scored a sizable profit, although slightly less than market expectations.
I think what disappointed investors was neither that the profit for the short period of three months was smaller than expected nor the tone of the executive’s apology. As the executive acknowledged, talk of a crisis at Samsung has not begun suddenly but has been brewing for a long time.
What investors wanted to hear from the management of the world’s leading technology company was not a sincere promise to “take a fresh look at our culture and ways of working, and fix what's broken” and to “rebuild our tradition of trust and communication.”
No matter how sincere one may be, promises alone can’t turn around such a big and important company. It's time to take action and get results.
Yoo Choon-sik
Yoo Choon-sik worked for nearly 30 years at Reuters, including as the Chief Korea Economics Correspondent, and briefly worked as a business strategy consultant. The views expressed here are the writer’s own. -- Ed.
