Third-Generation Emerge in Conglomerates
By Cho Jin-seo
Staff Reporter
The management of family-run conglomerates is getting younger this year, as third and fourth generation offspring of founding families are assuming more responsibility.
A number of conglomerates, most of them founded in the mid-20th century, have promoted grandsons or great-grandsons of their founders to take the seats in their new-year shuffle of executive positions. The transfer of shares from fathers to sons will also speed up the generational shift.
Doosan Group announced on Monday the promotion of Park Yong-maan from vice chairman to chairman of Doosan Infracore, which could make him the de facto leader of Korea's oldest corporation after three older brothers. The 52-year-old earned accolades last year when he led Doosan Infracore's acquisition of U.S.-based Ingersoll Rand's Bobcat subunit for $4.9 billion ― the largest foreign purchase ever by a Korean firm.
Two of his nephews Park Jung-won and Park Ji-won also took core positions in the rapidly growing conglomerate. Park Jung-won, 45, former vice chairman of Doosan Construction & Engineering, is now the vice chairman of Doosan Corp., the soon-to-be holding company of the group, and Park Ji-won, 42, was named as the president of Doosan Heavy Industries, the workhorse subsidiary of the group.
Park Jung-won and Park Ji-won are sons of Park Yong-gon. They will be accompanied by veteran executives such as Doosan Heavy Industries CEO Lee Nam-doo and Doosan Infracore CEO Choi Seung-chul, both of whom also got honorary promotions to vice chairman positions in their respective companies.
The series of promotions at Doosan is expected to facilitate the transfer of management control to the younger generation. Park Yong-maan is the fifth son of former Doosan Chairman Park Doo-byung, and three of his four older brothers ― Yong-gon, Yong-oh and Yong-sung ― have carried out the chairman's role in turn since the 1970s. At 52, he is more than 10 years younger than any of his older brothers, making him an ideal leader who can fill the age gap between the third and the fourth generations.
``The promotions in the top executive reflect each company's shining performance,'' the group said in a release. ``The harmony between (group) owners and other managers will strengthen the group's competence.''
At Hyundai Group, 35-year-old Chung Ji-sun became the chairman of Hyundai Department Store Group as of Jan. 1, marking the launch of the third generation of its ownership management system in the group. The new chairman has been overseeing its business since 2003 as vice chairman, under the guidance of his father, Chairman Chung Mong-keon. The senior Chung is the third son of the late Hyundai Group founder Chung Ju-yung.
The young chairman inherited a 17.1 percent stake from his father between 2003 and 2007, to become the largest shareholder of the company. During the process, they paid some 170 billion won of inheritance tax.
Hanjin Group also saw promotions of the third-generation heirs. Cho Hyun-ah, the eldest daughter of Hanjin Group Chairman Cho Yang-ho, and Cho Won-tae, her brother, were promoted to ``class A'' vice president and ``class B'' vice president, respectively. Cho Hyun-ah has built up a strong reputation and a vast human network in Korean Air as the director of In-flight Sales Team, running both duty free and in-flight catering services. The duty free sales of Korean Air have more than doubled since 2001 when she assumed the role of the director.
The young leaders at Korean conglomerates are mostly the grandsons or great grandsons of founders, as most of the business groups were formed between the 1940s and the 1970s. The major difference of the new generation from their predecessor is that they have a stint of foreign experiences, especially in the form of a graduate degree from foreign schools. For example, Doosan's Park Yong-maan has an MBA from Boston University, and Hanjin's Cho Hyun-ah majored in hotel business administration at Cornell University.
According to a Chosun Ilbo report last year, there are 40 third- and fourth-generation managers in 62 conglomerates in Korea. Their average age was 42, and 33 of them were male. Surprisingly, only four of them do not hold a foreign degree. Twenty-two of them have MBAs from the United States, and 30 others have graduate degrees from foreign schools. Six of them were found to have Ph.Ds.
Though many of the third- and fourth-generation leaders are climbing the rungs of the corporate ladder, not all of them have bright prospectis for this year. Samsung Group's heir Lee Jae-yong and Hyundai Motor Group's Chung Eui-sun will have some trouble either from bad publicity or bad performances.
Lee, the son of Samsung Group Chairman Lee Kun-hee and grandson of founder Lee Byung-chull, will be struggling with the dubious stock transfer from his father Lee Kun-hee this year. He has kept a low profile since prosecutors began investigations into the group subsidiaries that are suspected of helping him inherit the stocks from his father illicitly.
Kia Motors' Chung is being seriously tested for his managerial ability. The company posted 116 billion won of operating loss in the third quarter of last year. JP Morgan added humiliation to this on Monday by selecting the company's stocks as the ``must not buy'' item this year.