August 7, 2015 / 10:42 AM / 2 years ago

Succession feud mars legacy of Lotte Group founder

Han river and central Seoul are seen in this aerial view taken from 99th floor of Lotte World Tower, which is currently under construction, in Seoul March 4, 2015. REUTERS/Kim Hong-Ji

SEOUL (Reuters) - Shin Kyuk-ho, the founder of one of South Korea’s biggest and best-known conglomerates, has sought to crown his rags-to-riches success story by building the country’s tallest skyscraper.

In addition to the Lotte World Tower rising on the banks of the Han river, the 92-year-old is also likely to be remembered for his failure to map out a clear succession plan that has triggered a feud so intense that it has riveted a nation accustomed to warring corporate families.

Despite his advancing years, Shin has kept a tight grip on the retail-to-construction empire he built from a chewing gum maker 67 years ago: employees say he still issues directives, and until recently toured construction sites, including that of Lotte World Tower.

But even though his two sons ran Lotte’s operations in Korea and Japan, neither was ever publicly designated as heir-apparent, or holds a substantially larger stake than the other in the Lotte units for which public filings are available in South Korea.

Some analysts say the dispute at the group Shin named after the heroine of an 18th century Goethe novel highlights the perils of having too few people in control of the big conglomerates, or chaebol, that dominate Asia’s fourth-largest economy.

Succession woes have beset many such firms in recent years.

“The source of all the trouble is Shin Kyuk-ho’s unwillingness to pass on management control through succession, his belief that he must hold on until the end,” said Park Ju-gun, head of corporate analysis firm CEO Score.

The fight over Lotte, whose South Korean units generated $70 billion in revenue last year, appears to have started late last year, only to erupt into the public domain last week.

In December, Dong-joo, Shin’s elder son who ran its Japan operations, was removed from his posts, the Seoul-based Lotte Group said. A few months later, Shin’s younger son, Dong-bin, who runs the much larger South Korean operations, was promoted to co-CEO of Lotte Holdings, the group’s Tokyo-based holding company, Lotte Group said.

At the time, analysts and the media said Dong-bin’s promotion was a sign that he would succeed his father. But on July 27, the patriarch flew to Tokyo with elder son Dong-joo, and fired his younger son and five other board members, Lotte Group said. A Lotte Holdings spokeswoman declined to comment on any aspect of the dispute.

Days later, Dong-bin’s Seoul-based Lotte Group issued a statement questioning the independence of the patriarch’s actions. “Former vice chairman Shin Dong-joo and some family members arbitrarily took the general chairman, who is aged and has difficulty in movement and judgement, and induced a verbal dismissal announcement,” the statement said.

Since then, both sons and their supporters have continued to challenge each other’s claims to the empire.

The succession spectacle has fueled the resentment of many Koreans over the grip the chaebol hold over the economy. Some have also criticized Lotte’s ties to Japan, Korea’s former colonial ruler.

The office of Lotte founder Shin did not respond to requests for comment for this story. Shin Dong-joo could not be reached for comment while a spokeswoman for Lotte Group declined to comment on Dong-bin’s behalf.

Additional reporting by Se Young Lee in SEOUL and Tom Wilson in TOKYO; Editing by Tony Munroe and Miral Fahmy

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