‘My final target is to take control’
Billionaire Shin Dong-joo emphatically dished out this statement in one of his interviews after he was unceremoniously booted out by his younger brother Shin Dong-bin, the current chairman of the Lotte Group.
“My brother and the current management destroyed Lotte’s good corporate culture.” Dongjoo is the eldest son of Shin Kyuk-ho, the founder of the Lotte empire, whose 2016 revenues of $90 billion equaled that of Google Inc. sales. Kyuk-ho started the business more than 70 years ago selling chewing gum and built a business empire with dominating presence in many countries in Asia.
The group has diverse interests in hotels, construction, confectionery, shopping centers, petrochemicals, property and investments. To those unfamiliar with Lotte’s business interest, one of their best-selling snack food is “Pepero,” a cookie stick dipped in chocolate.
According to a Bloomberg article written by Sohee Kim, the battle at Lotte is “among the fiercest corporate power struggles in Asia -- rivaling the brawl raging atop India’s Tata Group -- as some of the region’s biggest dynasties undergo a once-in-a-generation leadership change.” Bloomberg further stated that Dong-joo has reason to be bitter. In the past couple of years, he’s been suspended by his father, fired by his younger brother and indicted on charges of embezzlement by South Korean prosecutors. Sibling rivalry has become very disruptive and has created incalculable damage to the conglomerate.
According to Wikipedia, sibling rivalry is defined as “a type of competition or animosity among siblings, whether blood related or not. The sibling bond is often complicated and is influenced by factors such as parental treatment, birth order, personality, and people and experiences outside the family. The rivalry is particularly intense when children are very close in age and of the same gender and/or where one or both children are intellectually gifted.”
Knowingly or unknowingly, siblings could be competing in many ways. It is not unusual to see siblings tangle, but in the interest of family and business harmony, the habit of quarreling should stop as there are more pressing issues at stake. Family business legacy and stewardship should always remain as the overarching goals of family members. And only through family and corporate governance can the enterprise achieve its full potential.
Critically, sibling rivalries can cause serious damage to the family business’ ownership structure. When they fight for control, the company’s growth plans for the future is completely halted. And when these petty, unresolved issues spills over to the business space, expect a disruptive and destructive environment.
In the case of the Lotte Group, the trouble started when the patriarch fired his eldest son Dong-joo in January 2015 for mismanagement. Dong-joo immediately asked for his father’s forgiveness and it was granted. The founder then asked the board led by the younger son, Dong-bin to reverse the decision. The younger son refused and earned the ire of the father, prompting the founder to demand Dong-bin’s (and his board) resignation.
The next day, the board called an emergency meeting and reverse the founder’s decision. Included in the reversal order was the ouster of the father as head of Lotte Holdings. Shin Kyukho was 92 when he was stripped of control by Shin Dong-bin.
When leadership and ownership succession are passed on to the children, they must not only be united but should possess the emotional and intellectual readiness to align founder values with corporate best practices. With their new role as stakeholders, they are expected to rise above individual issues, setting aside personality differences for the greater good. This is where the Shin family members miserably failed.
It is not unusual to see siblings tangle, but in the interest of family and business harmony, the habit of quarreling should stop as there are more pressing issues at stake.