Lotte chairman says feud on group control is over
Lotte Group Chairman Shin Dong-bin speaks during a National Assembly audit in Yeouido, Seoul, Thursday. / Yonhap
Listing of hotel unit planned in first half of 2016
By Kim Hyo-jin
Lotte Group Chairman Shin Dong-bin said Thursday that the family feud over control of the conglomerate was over and will never be repeated.
During a National Assembly audit, Shin said his father and Lotte founder Shin Kyuk-ho endorsed a plan to list Hotel Lotte on the local bourse during the first half of next year, vowing to improve management transparency.
“The management feud is settled. Such a thing will never happen again,” he said.
Regarding criticism here that Lotte is a Japanese company because the holding firm is in Japan, Shin stated that Lotte is a Korean firm.
“Most of Lotte’s earnings come from Korea and we pay taxes in Korea. Most of our staff are also Koreans,” he said.
It was the first time that the head of one of the nation's top 10 conglomerates has appeared before an Assembly audit. Lawmakers grilled him about the company’s governance structure.
They urged him to reform the opaque management system in the family-controlled firm, citing public antipathy against the group, following the recent succession feud.
“People were significantly disappointed with the Lotte Group for running Korean and Japanese operations in a shady way,” said Rep. Kim Young-hwan of the main opposition New Politics Alliance for Democracy (NPAD).
“They also wonder about the identity of the group,” he said, pointing out that over 99 percent of shares in Hotel Lotte, the de facto holding company of Lotte Korea, are held by Japanese investors.
Kim Tae-whan of the ruling Saenuri Party agreed, saying, “Lotte needs to execute reform in a way to dilute people’s concern about the firm’s identity and shady managerial practices.”
Shin vowed to simplify Lotte Group’s cross-shareholding structure among affiliates, saying the group will eventually transform itself into a holding company structure.
“The cross-shareholding structure — the portion of 80 percent — is expected to be revised by the end of 2016.”
A taskforce responsible for overhauling its corporate governance structure was launched and is working on reform, he added.
Responding to criticism of the succession feud, he apologized and expressed confidence in his grip on the company.
“I sincerely apologize for causing concern among citizens,” he said. “I promise there won’t be any trouble in terms of the company’s leadership.”
Shin’s appearance came as a move to soothe public discontent after the recent succession dispute, involving founder Shin Kyuk-ho’s two sons — former Lotte Holdings Vice Chairman Shin Dong-joo and Lotte Chairman Shin Dong-bin.
Lotte’s opaque management system came to the fore with the feud that ended favorably for the incumbent leader.
Afterwards, Shin was questioned about the legitimacy of his control of the 90 trillion-won business empire with 81 affiliates in Korea when he holds only 2.41 percent of company shares.
He held a conference on Aug. 11 and apologized for the internal dispute and pledged to bring transparency to the company’s governance structure and enhance fair trade among others.
Shin was fined 10 million won ($8,870) for not appearing at the annual audit held last year.
He could not avoid the call to be present for the audit this time as public antipathy was high after the group was found to have a shady management system.