Lotte put under emergency management and collective leadership

Lim Chang-won Reporter Posted : 2018-02-14 10:15 Updated : 2018-02-14 10:15
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[Yonhap News Photo]

SEOUL, Feb. 14 (Aju News) -- Lotte, South Korea's fifth-largest conglomerate, was put under emergency management controlled by a body of top executives Wednesday following the unexpected imprisonment of group leader Shin Dong-bin for bribery.

A collective management system involving top professional managers from four key business divisions was set up under the stewardship of Vice Chairman Hwang Gag-kyu of the group's holding company, Lotte Corp., which was launched in October last year to enhance corporate governance and transparency in management.

Hwang, the right-hand man of the jailed Lotte chairman, has played a major role in strategic planning and group-wide affairs. Shin and Hwang co-head the holding company which has more than 40 affiliates under its wing.

Shin, 62, was jailed on Tuesday after a criminal court in Seoul sentenced him to two years and six months in prison on charges of bribing Choi Soon-sil, the crony of South Korea's ousted ex-president Park Geun-hye. Choi received a 20-year jail sentence for meddling in state affairs and coercing conglomerates to make illegal donations.

The Lotte chairman was found guilty of providing seven billion won (6.46 million US dollars) to a foundation run by Choi in return for favors related to a duty-free shop located in the Lotte World Tower which opened in April last year as South Korea's new high-rise landmark.

The verdict, which has never been anticipated by Lotte, coincided with a decision by Lotte Duty Free to close down some of its shops in the terminal of Incheon International Airport. The company claimed its shops in the country's main gateway could not pay rent due to a sharp fall in sales. Lotte has been the prime target of China's trade retaliation that began after the group let US troops set up a missile shield in its golf course.

Like other family-run conglomerates, the ruling Shin family has controlled Lotte by using a complex web of cross-shareholdings among affiliates. Shin, who has been dogged by a family feud, secured firm group-wide control by launched the holding company but he has yet to complete the realignment of group structure.

Initially, Shin proposed the initial public offering of Hotel Lotte, but the IPO has been delayed due to a family feud and an investigation by prosecutors into Lotte's illegal business activities.  Prosecutors have brought charges against a dozen incumbent and former Lotte executives.