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SKOREA-ECONOMY-RETAIL-APPLIANCES
S. Korea’s Lotte keeps jailed chairman in key position
SEOUL, June 29, 2018 (BSS/AFP) – South Korean retail giant Lotte Group
kept its jailed chairman in a key affiliate post Friday despite an effort by
his brother to oust him, re-igniting a bitter family feud.
The company has been assailed by scandal in recent years, with the
founder’s two sons engaging in a vicious and public battle for control.
The younger, Shin Dong-bin, ultimately prevailed, but was jailed for two
and a half years in February in connection with the corruption scandal that
brought down president Park Geun-hye.
His brother Shin Dong-joo reopened hostilities Friday and tried to have
his sibling ousted from the board of an important Japanese affiliate, only
for shareholders to stick with the incarcerated executive.
In a statement, Lotte said it was “relieved” at the decision that came
despite what it called the “absence” of its chairman. “We hope to promptly
overcome the current difficulties,” it added.
South Korean business is dominated by sprawling but controversial family-
run empires like Lotte Group and Samsung, known as chaebol.
The chaebols were instrumental in South Korea’s rise to become the world’s
11th-largest economy, aided by low-interest loans and close government
connections.
But now they are criticised for stifling innovation and competition, while
the controlling families are accused of running the firms like personal
fiefdoms with minimal regulation by officials.
Family feuds and criminal charges — often related to tax evasion or
bribery — regularly make headlines.
Samsung scion Lee Jae-yong was jailed last year for his own role in the
Park scandal, although most of his convictions were quashed on appeal.
– Adopted son –
Friday was an eventful day for South Korea Inc., with the LG group making
progress in a family succession.
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SKOREA-ECONOMY-RETAIL-APPLIANCES 2 LAST SEOUL
Koo Kwang-mo, a senior executive at LG Electronics and the adopted son of
late group chairman Koo Bon-moo who died in May, was appointed to the LG Corp
board at a general shareholders’ meeting.
The 40-year-old is expected to eventually be named CEO, Yonhap news agency
said, becoming the fourth generation of his family in charge.
He was born a nephew to his predecessor, but the elder Koo — who had
fathered two daughters — adopted him in 2004 to ensure he had the status of
the eldest son and preserved the direct male family line, an important
consideration in a society that in some areas remains extremely
traditionalist.
Ordinarily nephews are well down the inheritance order in South Korea,
following children, parents and brothers.
LG, best known internationally for its household appliances, has its
origins in a humble cloth shop opened by founder Koo In-hoe in 1931.
It now has 68 subsidiaries, 222,000 employees around the world, and
according to government statistics an estimated total market capitalisation
of 112 trillion won ($100 billion).
But it faces mounting competition from Samsung and Chinese rivals in the
key mobile and display sectors.
Unusually, the Koo family have largely avoided scandal, and also have an
abnormally high collective stake in LG, between them owning 46.7 percent of
the holding company.
But Chung Sun-sup, head of corporate analysis site chaebol.com, said the
group has been slow to acquire new units and invest in new technology because
of the family’s vested interests.
“Kwang-mo needs to show his managerial acumen if he wants to avoid public
attacks over another chaebol succession,” he told AFP.
President Moon Jae-in’s government has sought to weaken the chaebols’
economic power, but a raft of laws aimed at improving corporate governance,
enhancing fair trade and protecting small shareholders have been stranded in
parliament.
Chung blamed strong lobbying by the chaebols and political bickering
between rival parties.
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