SK’s One-Chairman Management System For the Time Being

An arrest of Choi Tae-won, SK’s chairman, will unavoidably lead to a substantial change in SK’s management structure. In particular, the aggressive management will be deadlocked because the chairman has recently been leading corporate M&A and the advance of new businesses.

Most of all, a professional manager structure is expected to be more strengthened. Therefore, there is a prospect that the role and power of Chairman Sohn Kil-seung, who seemed to stay away from the business of the group as he took office as chairman of the Federation of Korean Industries, will be greater again.

So far, Chairman Choi has been in charge of the management inside the group while Chairman Sohn was responsible for external management. However, Choi has been expanding his territory. Particularly, as Chairman Sohn took office as FKI’s chairman, the takeover of management rights to Chairman Choi was expected to accelerate. Nevertheless, such a structure will be forced to change when Choi is arrested.

For the time being, veteran executives, who were away from day-to-day management, such as Hwang Doo-yeol, vice chairman of SK Corporation, are likely to actively participate in the management with Chairman Sohn in the center.

Also, the enthusiasm for the expansion of new businesses is expected to cool down. Although SK group made clear that since each subsidiary has been doing business on their own, there will be no big change in the directions of the businesses, changes will be unavoidable to some extent, considering the role of Chairman Choi, who has been experimenting various To-Be models and leading the expansive management. For the latest few years, the group has been drawing attention for its aggressive management, while others have been taking prudent attitudes in their investment.

What is in the spotlight is whether the governance structure of large shareholders, and furthermore the potential successor will change or not. Among Choi’s family members, those participating in the management are Choi Jae-won (40 years old, vice president of SK Telecom) and Choi Chang-won (39 years old, vice president of SK Global). The former is Chairman Choi’s own brother and the latter is the chairman’s cousin, who is the third son of the late Choi Jong-Gun, the founder of SK Group. At a family meeting after Chairman Choi Jong-hyun’s death, they agreed to entrust the management rights and shares to Chairman Choi and as a result, they have practically no shares of the subsidiaries. Accordingly, there will be no change in the corporate governance even if Chairman Choi is arrested, unless he voluntarily gives up his own shares.

A prolonged absence of Chairman Choi, however, may lead to a change. If not the corporate governance, the role of the two vice presidents will be greater in the group management.

Myung-Jai Lee mjlee@donga.com