The Korea Fair Trade Commission designated younger leaders of LG, Doosan and Hanjin as new heads of the conglomerates on Wednesday to replace their fathers who recently passed away.
Every May, the FTC announces an updated list of conglomerates with assets more than 5 trillion won ($4.2 billion) and the owners of the groups, for the purpose of regulating large companies.
LG Group’s head position was changed to Koo Kwang-mo, 41, who takes the place of his late father, former Chairman Koo Bon-moo. Doosan’s Park Jeong-won, 57, and Hanjin’s Cho Won-tae, 44, also replaced their late fathers, former Chairmen Park Yong-kon and Cho Yang-ho, respectively.
“We designated the three leaders as the groups’ new heads, as their fathers passed away. Changes in corporate governance seem to begin with the emergence of the fourth generation of (conglomerate) founders,” said Chung Chang-wook, chief of the FTC’s business group policy team.
Last year, the FTC designated Lee Jae-yong as head of Samsung Group, as his father, bedridden Chairman Lee Kun-hee, was judged as incapable of independent business management. It also designated Shin Dong-bin as head of Lotte Group, replacing his father, group founder Shin Kyuk-ho.
As for the nation’s largest automaker, Hyundai Motor, the FTC retained the top position of Chairman Chung Mong-koo. Despite his son Chung Eui-sun being higher profile, authorities view the son as still being influenced by his father.
LG Group Chairman Koo Kwang-mo, Doosan Group Chairman Park Jeong-won and Hanjin Group Chairman Cho Won-tae
The designation of heads by the FTC every year -- a rare measure in other nations -- began in 1987, when Korea started to enforce policies on conglomerates to curb the power of controlling families, which are often involved in corruption, abuse of power, cross-shareholding and illegal inter-affiliate deals.
By designating a group’s owner, the authorities can use this as a base to define a range of relatives, executives, nonprofit corporations and affiliates of the group. The head also has an obligation to submit documents related to disclosure, and if these are false, he or she could be accused of submitting false information.
Some say the government needs to reconsider measures related to the designation of conglomerate heads, given generational changes and new management styles.
For instance, Lee Hae-jin, founder of Korean internet giant Naver, is still designated as holding the top position despite his departure from the company’s board last year. Naver wanted to change this, but the FTC presumed Lee still exercises dominant influence over the company’s management.
“Given Korea’s unique conglomerate situation, where founders exert strong influence, the government needs to be in a position to make policy decisions as conservatively as possible,” said Chung Chang-wook.
Park Ju-keun, president of corporate analysis company CEO Score, said it is necessary for the nation to continue designating conglomerate heads. “Despite generational changes, it is still too often seen that owner families are mired in all sorts of corruption cases.”
By Shin Ji-hye (email@example.com)