Completion of Korea-Japan Integrated Management... Shin Dong-bin Raises the Sails of 'One Leader One Lotte'

Chairman Shin Dong-bin Appointed as Chairman of Japan Lotte Holdings
Dispute with Brother Shin Dong-joo Ends After 4 Years
Major Japanese Shareholders Also Give Positive Evaluation of Chairman Shin
Three Key Tasks Amid COVID-19 Crisis

[Asia Economy Reporter Cha Min-young] Shin Dong-bin, Chairman of Lotte Group Korea, has completed an integrated Korea-Japan management system by concurrently holding the position of Chairman of Lotte Holdings Japan. Accordingly, the so-called "brothers' conflict," a management dispute with his older brother Shin Dong-joo, Chairman of SDJ Corporation, has come to an end after more than four years.

Lotte Group announced on the 19th that Shin Dong-bin was appointed as Chairman of the Board of Directors of Lotte Holdings Japan on the afternoon of the 18th. His inauguration date is set for the 1st of next month.

Lotte Holdings Japan had been operated under the late Chairman Shin Kyuk-ho and Vice Chairman Shin Dong-bin. Since Shin Kyuk-ho was appointed Honorary Chairman in 2017, the chairman position had remained vacant. The management dispute between Chairman Shin Dong-bin and Chairman Shin Dong-joo of SDJ Corporation (former Vice Chairman of Lotte Holdings Japan) over control of Lotte Holdings Japan has been ongoing since 2014. The "brothers' conflict," which escalated in 2015, continued for over four years, moving between shareholders and boards in both Korea and Japan. However, the dispute was settled when Chairman Shin returned as CEO of Lotte Holdings in February last year.

The appointment of Chairman Shin to Lotte Holdings Japan is particularly significant as the company sits at the top of the Korea-Japan Lotte Group's governance structure. It is interpreted as a favorable evaluation of Chairman Shin by major shareholders and board members, including the Japanese employee shareholders' association. It is also seen as extinguishing any chance of a recurrence of the management dispute with Chairman Shin Dong-joo.

However, with the domestic and international economy facing critical challenges such as the COVID-19 pandemic, Chairman Shin's concerns have deepened. There are internal and external criticisms that the position of the offline retail giant, which ranks first in offline distribution, is being shaken due to competition from emerging e-commerce companies and regulations on large supermarkets. The impact of the retaliatory measures following the deployment of the THAAD (Terminal High Altitude Area Defense) system in China since 2017 also dealt a severe blow.

There are three major immediate tasks for Lotte Group. First, as directly stated by Chairman Shin, is the restructuring of Lotte Shopping. In an interview with Japan's Nihon Keizai Shimbun (Nikkei), Shin said, "We will abandon all successful experiences in physical stores," and added, "We will close about 20%, or a total of 200 stores, among domestic large supermarkets, specialty stores, and department stores that are not profitable within this year." Currently, detailed reviews of sales and profit structures are underway, focusing on major affiliates, and restructuring has begun. Lotte Hi-Mart has decided to close 11 out of its 460 stores and consolidate 21 stores. During this process, voluntary retirement is being offered to employees aged 50 and above, from assistant managers to department heads, who have worked for more than 25 years.

Another important task is the listing of Hotel Lotte as part of efforts to improve governance. Hotel Lotte, which serves as the holding company of Lotte Group Korea, is a key and immediate task in the group's governance improvement efforts. Lotte Group expects that Chairman Shin's appointment as CEO and Chairman of Lotte Holdings will strengthen the momentum for Hotel Lotte's initial public offering (IPO). From a long-term perspective, integrated Korea-Japan Lotte Group management can be highlighted. Chairman Shin has intensified his "shuttle management" by traveling between Korea and Japan several times last year. Lotte Group plans to strengthen exchanges and cooperation between Korea and Japan Lotte and pursue global strategies to enhance synergy. Both Korean and Japanese Lotte companies intend to continue efforts to enhance management transparency and increase corporate value.

A Lotte Group official said, "With Chairman Shin Dong-bin's appointment as Chairman of Lotte Holdings, he will become the official owner of the Chiba Lotte Marines, moving from acting owner to owner," adding, "This reaffirms the strong trust of the Japanese Lotte management and solidifies his position as the leader responsible for managing Lotte in both Korea and Japan."