Lotte chief’s conviction rekindles family feud over management control

Shin Dong-bin and Shin Dong-joo

The conviction of Lotte Group Chairman Shin Dong-bin has reignited a bitter family feud between the two siblings as Shin’s older brother shows signs of mounting a comeback amid a leadership vacuum in South Korea’s fifth largest conglomerate.

Shin Dong-joo issued a statement last Tuesday calling for his younger brother’s resignation and dismissal from his position as chairman of the Tokyo-based Lotte Holdings, according to industry sources on Sunday. The statement came after Shin Dong-bin was sentenced to a 30 months’ jail term with a court finding him guilty of offering bribes to a confidante of Korea’s impeached President Park Geun-hye.

“Never in Lotte Group’s 70-year history has the chair been jailed for a criminal offense,” said the elder Shin in the statement, adding that Shin Dong-bin’s swift resignation is vital for the future management of the company.

Shin Dong-bin is currently co-chairman of Lotte Holdings Japan, a key part of the group with a 99 percent stake in Hotel Lotte, the de facto holding company that controls the sprawling empire by owning shares in multiple affiliates in Korea.

Lotte is a Korean-Japanese conglomerate founded in Tokyo by Korean businessman Shin Kyuk-ho in 1948. What started as a small confectionary business gradually expanded into a massive empire whose operations now range from retail, chemical to hotel and construction. The elder Shin Dong-joo was handed the reins to the business in Japan while the younger Shin Dong-bin was given control of Korea. But an ongoing sibling rivalry resulted in Shin Dong-joo being ousted from his position as vice chairman of Japan’s Lotte Holdings in 2015. He has since staged a series of comebacks, including attempts to remove his brother from the board of Lotte Holdings, but to little avail.

Shin Dong-joo continues to hold sway over Lotte Holdings Japan with his largest stake at Kojunsha, an asset management company that also owns the biggest 28.1 percent stake in the Japanese unit.

Observers say there is a possibility of the elder Shin gathering shareholders in his favor to launch another comeback.

In the absence of leadership with Chairman Shin behind bars, Lotte Group has reportedly set up an emergency committee of vice chairmen and plans to meet with Japanese shareholders of Lotte Holdings.

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