Former Namyang Dairy CEO Hong Won-sik's Family Sells Management Rights for 310 Billion KRW
Construction Company Rebates, Son's Military Service Fraud, Granddaughter's Drug Use Allegations
Unending Incidents and Owner Risks Push Company to the Brink
Hong Won-sik, chairman of Namyang Dairy Products, is shedding tears while issuing a public apology regarding the recent controversy caused by the announcement that the company's dairy product, Bulgari, has an effect on suppressing COVID-19. The apology took place on the 4th at the main auditorium of Namyang Dairy Products headquarters on Dosan-daero, Gangnam-gu, Seoul. Photo by Kim Hyun-min kimhyun81@
[Asia Economy Reporter Lim Hye-seon] The former chairman of Namyang Dairy Products, Hong Won-sik, and his family have finally sold their management rights for 310 billion won. This marks the first change in ownership in 57 years since the company's founding in 1964.
Private equity firm Hahn & Company signed a stock purchase agreement (SPA) on the 27th through Hahn & Co. No. 19 Limited Partnership to acquire 378,938 common shares of Namyang Dairy Products (approximately 53%) from former chairman Hong and others for 310.72916 billion won.
Namyang Dairy Products has repeatedly been hampered by 'owner risk.' Hong Won-sik, the eldest son of the company's founder and honorary chairman Hong Doo-young, joined the company in 1977, became vice president in 1988, and was appointed CEO in 1990. However, the company's image was shaken by continuous incidents and scandals involving Hong and his family.
In 2003, Hong was arrested on charges of receiving a 1.3 billion won rebate from a construction company during the construction of a Namyang Dairy Products factory in Cheonan, Chungnam Province. He was convicted of breach of trust and received a suspended sentence the following year. Instead of stepping down, he assumed the position of chairman. Additionally, he was investigated for military service evasion after paying a broker 15 million won to exempt his son, Hong Jin-seok, from military enlistment. Last year, Hong was investigated for continuously posting defamatory online content against Maeil Dairies through a PR agency. Namyang Dairy Products had also been investigated by the police in 2009 and 2013 for distributing defamatory posts against competitors online.
It was not only Hong Won-sik. In 2019, Hwang Ha-na, the granddaughter of Namyang Dairy Products' founder Hong Doo-young, was arrested on drug use charges. Recently, Hong's eldest son, Executive Director Hong Jin-sung, was removed from his position last month amid allegations of embezzling company funds through luxury car rentals. Although Namyang Dairy Products has maintained a professional management system, it is known that Hong Won-sik's 'emperor-style management' persisted behind the scenes.
Namyang Dairy Products was pushed to the brink after suffering from a boycott following the 2013 agency bullying scandal and more recently the controversy over the COVID-19 effects of its product, Bulgaris.
The new owner, Hahn & Company, plans to introduce an executive officer system at Namyang Dairy Products. This move aims to strengthen management transparency and regain consumer trust.
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