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Anti-business sentiment possible over Lotte family feud

Posted August. 04, 2015 07:20,   


Lotte Group Chairman Shin Dong-bin who arrived in Korea from Japan through Gimpo Airport Monday made an apology to the public for the family feud over the management control with his older brother Shin Dong-joo, the former vice chairman of Lotte Holdings, a holding company of Lotte Group in Japan. “My role is to resolve the situation at the earliest possible time and to normalize and develop Lotte businesses in and out of Korea,” said the chairman at the airport. However, he said the document made public by his brother, which is signed by his father and Lotte founder Shin Kyuk-ho to dismiss him from the CEO post, is not legally valid, making it clear that he will confront his older brother in the fight over succession of the group.

Criticism is growing as the power struggle to win control over Korea’s No.5 conglomerate becomes mudslinging among the controlling shareholder’s family members. Former Vice Chairman Shin Dong-joo delivered a video footage of Lotte founder Shin Kyuk-ho to local TV stations. In the video, Lotte Group’s General Chairman Shin Kyuk-ho says, “I have never appointed my second son Dong-bin as the chairman of Lotte Group in Korea. I cannot forgive him.” Shin Dong-bin, the current chairman of the group, refuted that his brother is utilizing their father in his old age to manipulate mass media.

The feud in the Lotte owner family reminds us of a dead-end drama based on absurd and unrealistic storyline, as the battle is turning into a secret revelation war and attempts to manipulate media. It is not pleasant to see relatives of the family, who have few shares of the Lotte Group, are taking sides to fight against each other in a pursuit of their interests. Doubts were raised over mental soundness of the founder because of the video footage in which Lotte founder Shin Kyuk-ho, who himself appointed the second son Shin Dong-bin as the group chairman in 2011, said the opposite from the fact.

Chairman Shin Dong-bin emphasized that Lotte Group is a Korean company as it generates around 95 percent of sales in Korea. However, it is confusing since the management control of Korea’s No.5 conglomerate is to be decided by hands of Japanese shareholders. General public in Korea should take caution against rising nationalism and refrain from ignoring the fact that Lotte Group has paid great amount of tax to the Korean government and created jobs in Korea, even though the group has a unique management structure.

Stock prices of Lotte subsidiaries, which took an upturn in the beginning of the succession battle, are now moving downward. If the feud lasts over an extended period, it is likely to affect Lotte’s credit ratings negatively. The "owner risk" might collapse the business value. Korean business circle is concerned over the Lotte family feud as the succession war might spread anti-business sentiment. If conglomerates are affected by the aftermath in the midst of a sluggish economy, it can freeze the economy further.

Politics are now calling Lotte’s succession battle “Betrayal of the Korean people,” and even mentioning reform of the conglomerates’ management structures. The two brothers are to be blamed for letting the situation get to the point that the politics talk about reform of the Lotte Group. Management control of the Lotte Group will be determined at the general meeting of shareholders in accordance with commercial laws. However, the two brothers should not disappoint the public further and show attitude of self-reflection.