41-year-old chairman officially becomes LG king
Every May, the Fair Trade Commission (FTC) confirms the existing heads of chaebol, or designates new ones in order to define responsibilities under the relevant law.
Chaebol are Korea’s unique business conglomerates where founding families exert almost unlimited control despite only directly owning a small number of shares.
Last year, Samsung Group Vice Chairman Lee Jae-yong and Lotte Group Chairman Shin Dong-bin were officially tapped as the two groups’ scions by the FTC.
The two groups’ previous owners are still alive but the former’s father, Samsung Chairman Lee Kun-hee, is bed-ridden while the latter’s father, Lotte founder Shin Kyuk-ho, suffers from Alzheimer’s disease.
Last May, the FTC named Shin as Lotte’s overall boss even though he was in prison after being found guilty on charges of bribery and embezzlement. He was set free last October after an appeals court suspended his jail term.
This year, the anti-trust overseer designated LG Chairman Koo Kwang-mo as the group’s official head on May 15 as his predecessor Koo Bon-moo died last year.
But there is a hidden story behind the seemingly typically father-to-son power transfer of LG. The current Chairman Koo is the late Koo’s adopted son.
In fact, the young businessman was the late Koo’s nephew, the son of his younger brother Koo Bon-nung who leads the small-sized Heesung Group.
Unlike other conglomerates like Samsung, LG has a family tradition of transferring managerial rights only to the eldest son. By contrast, Samsung Chairman Lee Kun-hee is the third son of founder Lee Byung-chul.
Originally, the late Koo had a son and a daughter but his son died in 1994 at the age of 19. The cause of his death remains a mystery and is not public knowledge, as LG officials are tight-lipped about it to this day.
Then, the late Koo tried to have a son, but his wife gave birth to a daughter in 1996 when he was 51 years old.
As he did not have a biological son, he decided to adopt one in 2004 and that is how Koo Kwang-mo became the current chairman.
Fortuneteller & adoption
A source who has known Chairman Koo for a long time said that the “selection process” before the adoption was quite long and comprehensive.
“Koo said LG checked every detail of all the candidates to come to a final decision,” said the source who asked not to be named.
“He even said there was a fortuneteller who predicted whose future would be the best among the candidates.”
And this is not a story about kingdoms in the Middle Ages, but rather modern Korean companies.
LG Group heads have been in the vanguard in getting the conglomerate to be respected as an exemplary corporate citizen – its leaders have never been prosecuted unlike tycoons from other groups who have become court regulars.
But a father-to-son power transition involving an adoption has brought about some criticism.
“Even Korea’s representative corporations have a feudal governance system. Although such a chaebol system may have short-term advantages, it should be changed in the long run,” Prof. Lee Phil-sang at Seoul National University said.
“The basic tenet of capitalism is the division of ownership and management. Korea Inc. has yet to understand that.”
But not all observers are negative about the “feudal system” as many claim that this “unique” Korean governance format has helped in fast decision-making and instant business execution.
And for the time being, it seems that LG does not have any plan to change its governance system that pivots around its new 41-year-old boss.