Scion’s drug scandal endangers CJ succession
The drug scandal surrounding CJ Group Chairman Lee Jay-hyun’s son is jeopardizing the retail giant’s plan to give him enough of a stake in the company to take over management, according to industry officials, Tuesday.
They said the National Pension Service (NPS) is the No. 2 shareholder of the group’s holding firm CJ Corporation, and the pension fund may oppose the junior Lee’s appointment as a CJ Group board member as it did in other cases of misbehavior by chaebol owner family members.
The Incheon District Prosecutors’ Office confirmed that it was questioning Lee Sun-ho, 29, over his alleged violation of the Narcotics Control Act.
The heir apparent is suspected of attempting to smuggle dozens of e-cigarette cartridges filled with highly enriched liquid marijuana from the United States. Customs officers at Incheon International Airport caught him while screening his luggage.
If he is tried and found guilty, CJ’s bid to have him inherit the group’s leadership will face a huge setback.
In April, the group kicked off its management succession process by splitting the businesses of a key unit in the group’s shareholding structure, which would allow Lee Sunho and his sister Lee Kyeong-hoo to strengthen their grip on the group’s holding firm.
Through this process, Lee Sun-ho was expected to have a 2.8 percent stake or 800,000 shares in CJ Corp. in December.
This would make him the third-largest shareholder in the holding firm. Currently, he has no stake in CJ Corp.
“More and more companies are striving to enhance their corporate morality and transparency these days, but CJ Group’s heir-apparent has stirred a drug scandal,” an official at a domestic private equity firm said.
“Along with expected backlash from the public over his morality, the scandal will likely cause a setback in Lee Sun-ho’s management succession, given the NPS is enhancing its shareholder activism against companies creating social controversy.”
Currently, the state-run pension fund has a 7.48 percent stake in CJ Corp., following Chairman Lee with 46.84 percent.
Similar to other chaebol holding firms, CJ Corp.’s articles of association do not prohibit people with criminal records from becoming a member of its board, thus there is no rule banning Lee Sun-ho from becoming a CJ Corp. board member, even if he is convicted.
However, the NPS, as the second largest stakeholder in the group, can demand a new article prohibiting such people from the CJ Corp. board in any future company shareholder meeting.
The pension fund did so during a meeting of Hanjin Group’s holding firm, Hanjin KAL, in March.
An official at the NPS refused to comment on its actions on “a certain company” but said the “NPS’ stewardship code is about exercising shareholder rights on a company creating a social stir.”
A CJ Group official said “the group is still waiting for the outcome of the investigation and will come up with an official statement afterward.”