LG heir faces challenges
After LG Group Chairman Koo Bon-moo passed away on Sunday, his adopted son Kwang-mo is expected to inherit the throne of Korea’s fourth-largest conglomerate.
Ranging from earning trust from its shareholders to dealing with an inheritance-related tax, which is presumed to total about 1 trillion won ($927 million), the younger Koo has to hop over a series of hurdles before he fully inherits the throne of the group.
However, the ultimate hurdle the younger Koo has to overcome is how well he can manage the group.
While the group boasts revenue of 160 trillion won as of last year, it remains to be seen whether the 40-year-old heir apparent can lead the group with a sensible future growth plan.
Thanks to soaring sales of home appliances and premium TVs, LG Electronics posted revenue above the 60 trillion won mark for the first time last year, but it is still uncertain how long the uprising momentum would continue.
LG Electronics has not yet established its own cutting-edge competitiveness, as its counterpart Samsung Electronics has displayed its absolute dominance in the semiconductor business.
In order to lift its sluggish auto parts business portfolio, LG Electronics decided to acquire Austrian automotive headlamp supplier ZKW for 1.4 trillion won last month. Given that the Austrian maker is a global leader in auto- motive lighting with revenue of 1.26 billion euros last year, LG expects it could beef up its auto parts capacity. As seen in ZKW’s case, implementing more aggressive mergers and acquisitions (M&A) activities could be an option for the younger Koo as chief of the group.
LG has placed the company in the hands of professional CEOs, but this has not always been achieved.
The younger Koo may take the case of Nam Yong, former vice chairman of LG Electronics, as a lesson when operating the group.
While the company was having a fierce battle with its global mobile phone rivals Nokia and Samsung in the early 2000s, Nam chose to stick with feature phones rather than concentrating on the rising smartphone sector.
Nam was consequently ousted in 2010 for his decision and the late chairman employed his younger brother Koo Bon-joon as the CEO of the electronics firm in a bid to save the struggling company.
There have been disputes over negative aspects of Korea’s chaebol system as some conglomerate owners are prone to tyrannical management.
But those arbitrary decisions made by chaebol owners also have positive aspects, especially in the manufacturing sector that requires swift decisions on investments in technology.