Lotte chief vows to polish image

Retail-focused conglomerate pledges to invest 40 trillion won, expand hiring

By Lee Hyo-sik

Lotte Group Chairman Shin Dong-bin said Tuesday that the conglomerate will set up an ad-hoc committee to oversee business practices of its units to become a more transparent and socially responsible entity.

Shin said he will try again to have the shares of Lotte Hotel listed on the local bourse to improve the group’s governance structure, as well as downsize the group’s control tower and give more leeway to heads of each of the company’s subsidiaries.

Shin also promised that Korea’s fifth-largest family-controlled conglomerate will invest 40 trillion won ($35 billion) over the next five years and hire 70,000 new workers.

His remarks at a press conference at Lotte Hotel in downtown Seoul came days after he was indicted on charges of embezzlement and breach of trust.

The Lotte chief issued an apology, adding that he will do whatever it takes to overhaul the retail- and chemical-focused business group. The CEOs of the group’s 23 main affiliates were also present for the press conference.

“I am really sorry for causing grave concern to customers, business partners and Lotte employees,” Shin said. “I feel responsible for Lotte being subject to the prosecution investigation. I also hold myself responsible for not being able to more actively execute all the reform measures that I previously pledged.”

The chairman said he will do his best to transform Lotte into a company that conforms to social values and meets high ethical standards, adding that the group will abolish its cross-shareholding structure and establish a holding company to achieve transparent governance.

This was the second time Shin issued a public apology following one on Aug. 11, 2015, when he apologized for causing controversy over the unprecedented family feud with his older brother Dong-joo.

On Oct. 19, the Seoul Central District Prosecutors’ Office indicted Shin on charges of embezzling 175 billion won and breach of trust, concluding a four-month probe into Lotte Group. They also indicted Shin Kyuk-ho, the chairman’s father and Lotte founder, and Dong-joo, on charges of tax evasion and embezzlement.

With Shin Young-ja, the chairman’s sister, and Seo Mi-kyung, the founder’s common-law wife, indicted on similar charges, a total of five members of the Lotte founding family will face trial.

In a bid to get the group back on track, the chairman pledged to set up a compliance committee, bringing in figures from outside the company to supervise the business practices of all subsidiaries.

“Lotte will focus more on fulfilling its corporate social responsibility and pursue socially sustainable growth as it aims to become one of Asia’s top 10 business groups,” Shin said. “We will pay more attention to sharing growth with our business partners and community members, instead of blindly pursuing profits.”

He also pledged to downsize the group’s control tower in which about 300 people have held various roles since October 2004.

“We will drastically reduce the control tower’s role so that each unit is responsible for its own fate,” the chairman said. “We will try again to take Lotte Hotel public and turn it into a globally competitive hotel and duty free store operator. We will also list the shares of other group units to improve our corporate governance structure.”

As well as the added investments and new hires, he added that the group would make 10,000 contract workers regular employees over the next three years. He also pledged to end the ongoing family dispute over control of the group as quickly as possible.