The Korea Herald


Lotte row highlights family saga with Japanese roots

By KH디지털2

Published : Aug. 7, 2015 - 09:26

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A bitter family squabble over control of retail behemoth Lotte is the latest in a series of second- and third-generation scions sparring to cement their grips on lucrative corporate empires built by their fathers or grandfathers.

Lotte, the country's fifth-largest conglomerate, is mired in a leadership dispute among founder Shin Kyuk-ho, 93, and his two sons, Dong-ju and Dong-bin, who had each controlled the company's operations in Japan and Korea until early this year. While Dong-ju was ousted from key positions at Japanese units, Dong-bin took the helm at Tokyo-based Lotte Holdings, the group's holding firm.

The seemingly smooth power transition took a nasty twist late last month when Kyuk-ho and Dong-ju tried to dethrone Dong-bin from Lotte Holdings. In turn, Dong-bin demoted his father from general chairman to honorary chairman, claiming that his mental capacity has blurred due to age.

The Lotte drama rings a bell. It involves a fraternal rivalry with a younger but more ambitious sibling and the hardy founder who built a corporate giant from scratch, bearing the typical elements of succession feuds that erupted at such Korean conglomerates as Hyundai and Kumho.

But what sets Lotte apart from other family-controlled businesses, known as chaebol in South Korea, is its roots that trace back to postwar Japan and still remain an integral part of its corporate identity, an Achilles' heel that could seriously sour public sentiment amid frayed ties between Seoul and Tokyo.

Unlike its peers that were mostly established in the 1930s and 1940s when the country was still under Japan colonial rule or starting to recover from the atrocious period, Lotte was built on Japanese soil.

At the age of 20, Kyuk-ho, born in the southern port city of Ulsan, left for imperial Japan which ruled Korea from 1910. Lacking financial means, the future founder delivered papers and milk to support himself, according to Lotte Group's website.

He started as an entrepreneur in 1944 by building a cutting oil factory with seed money from a Japanese investor. The factory was soon destroyed by a fire, leaving Kyuk-ho with hefty debts.

Four years later, Kyuk-ho, who also goes by his Japanese name Takeo Shigemitsu, launched the confectionery Lotte that would later evolve into today's multinational corporate giant with more than 70 affiliates under its wings.

On the back of the huge popularity of bubble gum in postwar Japan, Kyuk-ho tapped into different food categories, ranging from chocolates to ice cream. In 1967, he expanded into his home country after diplomatic ties between Seoul and Tokyo were normalized.

The company soon became a household name here, known for its gum advertisements with catchy tunes and the immensely popular Lotte World amusement park, which helped the company build a friendly corporate image that overshadowed its Japanese roots.

Despite its continued ties with Japan, such as having its holding firm in Tokyo and acting as the retailer of Japanese brands such as Asahi Beer and Uniqlo, its Japanese roots were rarely discussed until an interview with the Shin family speaking in Japanese triggered a debate on their nationality and Lotte's corporate identity.

Dong-ju and Dong-bin, who use the Japanese names Hiroyuki and Akio, were both born and raised in Japan by their Japanese mother.

They both solely hold Korean passports after renouncing their Japanese nationality.

After the interview aired with Kyuk-ho and Dong-ju speaking in Japanese and using their Japanese names, viewers heaped criticism on their lack of Korean skills, considering the size and importance of Lotte in the Korean economy. It even led to suspicions that the company is shuttling profit from Korea to Japanese shareholders.

Lotte's 16 Japanese units under Lotte Holdings bagged 139.8 billion won ($119.9 million) in dividend payouts from Korean firms between 2012 and 2014, according to data by market tracker The amount also includes payouts from non-Lotte companies.

For now, Lotte seems to be focused on allaying public discontent over its historic links to Japan as it could deal a harsh blow to the group that heavily relies on the retail, food and travel industries.

"The group's countermeasure for this crisis can be summarized into two (parts). The first is cooperating with the government, and the second is untangling the misconception that Lotte is a Japanese firm," a high-ranking Lotte official was quoted saying.

On July 31, the group even released a statement, denying rumors that the Shigemitsu family is related to Mamoru Shigemitsu, a diplomat who served for imperial Japan and later was classified as a class-A war criminal.

The two brothers, despite their bout, seem to agree on the need to rub off their Japanese link for now.

In an Aug. 2 interview with broadcaster SBS, Dong-ju, who was criticized for only speaking in Japanese in previous interviews apologized with his wife in Korean.

The next day, Dong-bin stressed that Lotte is "a Korean company," saying that 95 percent of the company's sales are generated in the country. (Yonhap)