LG`s Restructuring Team Dismantled

LG Group`s restructuring team will be dismantled in five years with the launch of its holding company LG Co. Ltd. The members of the team will be hired by the holding company. There will be a temporary taskforce for the management supervision of the subsidiaries.

As the decision corresponds with chaebol policies of the new government, it is likely to influence other business groups maintaining the restructuring team, such as Samsung and SK.

“At the end of the month, we will dissolve the restructuring team which was established after the economic crisis in 1997,” said Kang Yoo-sik, LG’s vice chairman and head of the restructuring team, in a press conference at Yoido, Seoul on March 25.

“As the holding company LG Co. Ltd. was established on March 1, there is no need to run the team.”

Instead, LG decided to set up a ‘right-management taskforce’. Vice Chairman Kang explained that the taskforce will be responsible for analysis of the corporate activities at the request of each subsidiary’s board of directors and the audit committee, as well as monitoring the company on behalf of shareholders. The new team will have 20 some people made up of those from each subsidiary and CPAs next month. It will remain intact for the next five years until a responsible management system will be settled in each subsidiary, before its functions are to be handed over to each board of directors.

Starting with 50 members from the existing restructuring team from next month, LG Co. Ltd will consist of five different sectors including a support sector of general and legal affairs and secretarial work; financial management; development of new businesses; management of invested assets; and management of human resources.

Also, the company will develop the brand of LG into a top one and receive a certain rate of sales from the subsidiaries using the brand from 2005.

LG estimates that the restructuring team has contributed to securing foreign investment amounting to 6.5 billion dollars and lowering the debt ratio to 130% from the previous 507% in 1997.

Joong-Hyun Park sanjuck@donga.com