Who cares about Lotte's nationality?
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By Kim Jae-won
A recent family feud in Lotte Group has drawn attention from Koreans for the retail giant’s “dubious” nationality. Koreans seem to feel betrayed by the nation’s fifth-largest conglomerate, which they believed to be part of them, but in fact was incorporated in Japan.
The group’s de facto holding company is Japan-based Lotte Holdings, which is controlled by the small Tokyo-based company Kwang Yoon Sa owned by Lotte’s founding Korean-Japanese Shin family.
A cartoon published in a local newspaper Wednesday ridiculed Lotte Group Chairman Shin Dong-bin, illustrating him saying “Lotte is a Korean company” with a Japanese accent. Some media criticized former Lotte Holdings Vice President Shin Dong-joo for speaking in Japanese during an interview with KBS.
It is ridiculous to see local media being cynical about their Korean skills. Lotte is not a language school and their proficiency in Korean has nothing to do with their fight over the group’s managerial rights.
What is worse is that the nationality debate fails to touch on the key issues at the group. The problem is Lotte’s opaque and outdated corporate governance which is as complicated as robot engineering, not its nationality.
According to the Fair Trade Commission (FTC), the Shin family controls its 81 affiliates in Korea with a 2.41 percent stake through 416 circular investment links. It is problematic because the family enjoys a wide range of influence in the group while taking little responsibility for any crisis.
It is welcoming that the FTC said Wednesday that it is investigating the group’s ownership, including shareholders and the structure of investments. Lotte should cooperate with the agency faithfully if it wants to exit from the nightmare as soon as possible.
The second issue is whether Lotte pays appropriate taxes here. Local media reported that the National Tax Service (NTS) has investigated the group’s advertising affiliate Daehong Communications since earlier this year.
Market watchers wonder whether the agency will uncover some wrongdoings at the company and widen its investigations to other key affiliates, such as Lotte Shopping and Lotte Confectionery.
Lotte’s corporate integrity comes from its transparent governance and faithful payment of taxes; no matter what the nationality of its founding family, as this has little to do with the business operations of the group.
As long as it follows the nation’s laws in corporate governance and pays appropriate taxes, there is no reason to accuse the group only because its holding company is based in Japan. The focus should be on business, not nationality.