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Lotte chairman confident in bolstering grip on group
Lotte Group Chairman Shin Dong-bin bows his head during a press conference at the Lotte Hotel in downtown Seoul, Tuesday, to apologize for the succession feud with his elder brother Dong-joo. While making the apology, the chairman said he has no plans to share management with Dong-joo. / Yonhap
By Lee Hyo-sik
Shin Dong-bin says won’t share management with elder brother
By Lee Hyo-sik
Lotte Group Chairman Shin Dong-bin expressed confidence Tuesday in solidifying his control of the group operations both in Korea and Japan.
While making an apology for the succession feud with his elder brother at a news conference, he pledged to improve the group’s corporate governance and make its management more transparent.
However, he made it clear that he will not share management with his elder brother.
He said Lotte Holdings, the holding firm of Lotte Group in Japan, will hold a shareholders’ meeting on Aug. 17 to pass proposals mainly designed to improve its governance.
The shareholders meeting agenda will not include a vote on the dismissal of Dong-bin, who also holds the title of Lotte Holdings CEO, according to group officials.
Dong-joo, who has so far vowed to sack his younger brother from his post at the shareholders meeting, has remained silent for days over the issue. It is unclear whether the elder brother will push the proposal to dismiss his younger brother at the shareholders meeting.
The Lotte Group chairman said employee shareholders of Lotte Holdings stand behind him, showing confidence to vote down any bid to unseat him at the shareholders gathering.
He said Kwang Yoon Sa, a paper company, and employee shareholders own one-third each of the holding firm, while the remaining shares are owned by the Shin family, members of the board of directors and other corporate shareholders.
The chairman said he holds about a 1.4 percent stake in Lotte Holdings.
He then said he has no intention to share group management with his brother or his father.
“On a personal level, I would like to make amends with my brother and my father. But as far as the group management is concerned, I cannot offer concessions because Lotte employs 180,000 workers around the world.”
Still, he said he will appoint his father and group fonder Shin Kyuk-ho as honorary chairman when shareholders meet.
He said he will reduce the amount of Lotte Hotel shares held by the group’s affiliates in Japan.
“I hold myself responsible for what’s been happening at Lotte Group in recent weeks,” the chairman said. “I let down all of the people who care about Lotte Group. This disgraceful incident is caused by our failure to overhaul the group’s corporate governance structure and strengthen its management transparency,” Dong-bin said.
He said he will make every effort to resolve all the concerns expressed by the government, shareholders, employees and business partners.
The chairman said he will have Lotte Hotel listed on the local bourse as soon as possible, but declined to give a timeline.
“It is too early to say when we will take Lotte Hotel public at the moment because company stakeholders have to first reach a consensus on the issue,” he said. “But what I can say is I will do my best to make the hotel unit a publicly trading firm as soon as possible.”
Dong-bin then explained in detail about L-Investment firms. According to Lotte Group, which operates 80 affiliates in Korea, 12 L-Investment firms in Japan hold a combined 72.65 percent stake in Lotte Hotel, and Lotte Holdings owns a 19.07 percent stake in the company.
“It cost about $1 billion for the group to establish the Lotte Hotel in 1972. To finance the cost, Lotte Confectionary in Japan and other Japanese units jointly raised funds,” he said. “The companies then separated their investment division in 2000 and established L-Investment, which still remain today as the shareholder of Lotte Hotel.”
Dong-bin said the hotel began paying dividends to its shareholders in 2005, adding that Lotte Hotel and other group units in Korea paid only 1.1 percent of their operating profits in Korea as dividends to Lotte Holdings in Japan.
“Lotte Hotel is not a gateway of capital outflow to Japan. The company is a gateway for Lotte firms in Japan to invest in their Korean affiliates,” he stressed.
The chairman then vowed to simplify Lotte Group’s cross-shareholding structure among affiliates, saying that the group will eventually transform itself into a holding company structure.
“We estimate it will cost about 7 trillion won to turn the group into a holding firm. If we try to do so too quickly, this could adversely affect the group’s investment and hiring activities. So it has to be a long-term process,” he said.
Dong-bin also said the group will soon launch a task force responsible for overhauling its corporate governance structure. “We will also set up an ad-hoc committee to improve our corporate culture. Lotte will continue to increase the hiring of young people and expand corporate social responsibility activities.”
He stressed that Lotte is a Korean company, saying that the group has reinvested what it earned here. “We spent what we earned here in Korea. We never transfer profits generated in Korea to Japan or elsewhere. Lotte Group in Korea is much larger than its Japanese counterpart in terms of sales and the number of employees.”
When asked about whether he is willing to split Lotte Group into two, he flatly rejected the idea, saying Lotte units in Korea and Japan can generate synergy when they work together.
“Lotte Confectionary in Korea can make inroads into foreign markets with Lotte Confectionary in Japan. When combined, they are among the top 10 global food companies. Lotte Group should remain intact to preserve its corporate value and grow into a leading global company,” he said.