Rebellion of the Three Women in the LG Family... Will They Shake Up Management Control?

Request for Redistribution of Inherited Property to Chairman Koo Kwang-mo

The women of the LG family, who had conformed to the so-called primogeniture principle of inheriting most of the wealth and entrusting management rights to the eldest son, have rebelled. Kim Young-sik, the mother of LG Group Chairman Koo Kwang-mo, along with his younger sisters Koo Yeon-kyung, CEO of the LG Welfare Foundation, and Koo Yeon-soo, have filed a lawsuit against Chairman Koo, demanding a redistribution of the inherited assets. The estate left by the late former Chairman Koo Bon-moo amounts to about 2 trillion won, including 11.28% of LG shares. If the court rules in favor of the plaintiffs, a management rights dispute could arise during the redistribution of shares. Even if the court rules that there is no problem with the inheritance, an irreparable crack has formed in the LG family’s 75-year-old belief that "family members should not quarrel over property."

The biggest commonality in the succession line of LG Group chairmen?from Koo In-hoe to Koo Ja-kyung, Koo Bon-moo, and Koo Kwang-mo?is "primogeniture." LG has strictly adhered to the principle of eldest son succession. It is analyzed that the late former Chairman Koo, who lost his only son, adopted his nephew Koo in 2004 as a way to continue this principle. Female executives are extremely rare in LG and the broader LG-affiliated family. Only about two stand out: Koo Yeon-kyung, CEO of the LG Welfare Foundation, who has been in office for less than a year, and Koo Ji-eun, CEO of Ourhome.

This contrasts with Samsung, which early on fostered an atmosphere where daughters actively participated in management. Samsung’s late founder Lee Byung-chul’s two daughters, the late Lee In-hee, advisor of Hansol Group, and Lee Myung-hee, chairwoman of Shinsegae Group, were involved in management. Similarly, the late Lee Kun-hee, former chairman of Samsung Electronics, had daughters Lee Boo-jin, CEO of Hotel Shilla, and Lee Seo-hyun, chairwoman of the Samsung Welfare Foundation, active in management. Ourhome CEO Koo Ji-eun’s mother is Lee Sook-hee, the sister of the late Lee Kun-hee. In other words, CEO Koo’s maternal side is Samsung.

At LG, the person representing the family and responsible for management inherits the management-related assets, while other family members receive a fixed proportion of personal assets. Chairman Koo inherited 8.76% of LG shares according to this family tradition. His mother Kim and two younger sisters received some LG shares (Koo Yeon-kyung 2.01%, Koo Yeon-soo 0.51%) along with about 500 billion won worth of inheritance including financial investment products, real estate, and artworks from the former chairman’s personal estate. LG stated, "According to the principles and traditions of the LG family, all LG shares related to management rights should have been inherited by Chairman Koo. However, Chairman Koo accepted the requests of the other three heirs, agreeing that CEO Koo Yeon-kyung and Koo Yeon-soo would inherit 2.01% (approximately 330 billion won at the time) and 0.51% (approximately 83 billion won at the time) of LG shares, respectively."

The LG women claim there were procedural issues with the inheritance. Since the late former Chairman Koo passed away suddenly without a separate will, inheritance should have followed the usual statutory proportions. CEO Koo Yeon-kyung and others reportedly sent a certified letter to Chairman Koo last year outlining this. Under current inheritance law, the surviving spouse receives 1.5 times more property than each child, and the remainder is divided equally among the children. If the 11.28% of LG shares left by the late chairman were divided according to current law, Kim would receive 3.75%, and the three children including Chairman Koo would each receive 2.51%.

This would create grounds for a management rights dispute. Chairman Koo’s shareholding, as LG’s largest shareholder, would drop from 15.95% to 9.7%. Meanwhile, Kim’s share would rise from 4.2% to 7.95%, CEO Koo Yeon-kyung’s from 2.92% to 3.42%, and Koo Yeon-soo’s from 0.72% to 2.72%. Combined, the three would hold 14.09%, nearly double Chairman Koo’s stake.

Currently, LG shares held by Chairman Koo and special related parties amount to 41.7%. Relatives such as Koo Bon-sik, chairman of LT Group (4.48%), Koo Bon-neung, chairman of Heesung Group (Chairman Koo’s biological father, 3.05%), and Koo Bon-jun, chairman of LX Group (2.04%) hold small portions. If a management dispute arises, share consolidation and division among family members could occur. Since the late former Chairman Koo, who played the role of family meeting leader, passed away in 2018, there is no longer a "family elder" to stabilize the household.

People at LG say, "If the two were still alive, something unimaginable like this would never have happened." They believe a family meeting would have been held and everyone would have followed the decision. Elders from the broader LG family who have left LG lack the influence of former Chairmen Koo Bon-moo and Koo Ja-kyung. LG Group has a tradition where when the eldest son inherits the group, relatives either step back from management or become independent through spin-offs. For example, when Chairman Koo was inaugurated recently, Vice Chairman Koo Bon-jun stepped down as an advisor and became chairman of the spun-off LX Group. Most LG-affiliated companies like LS were born this way.

Even if the LG women, who lack corporate management experience, do not immediately enter management, they may still pose a threat to Chairman Koo by positioning a "white knight" within the family. CEO Koo Yeon-kyung majored in social welfare and has mainly been involved in social contribution activities. Her husband is Yoon Kwan, CEO of BlueRun Ventures, a private equity firm based in Silicon Valley, USA.

As LG enters the fifth year of Chairman Koo’s tenure, maintaining stable management rights means either winning the lawsuit or dividing the assets in a way other than LG shares. However, Chairman Koo has even taken out stock-backed loans to pay about 720 billion won in inheritance tax. He has completed five out of six installments using the installment payment system over the past five years. Without the help of his biological father, Heesung Group Chairman Koo Bon-neung, it will be difficult to secure funds to appease the LG women. Chairman Koo Bon-neung is the younger brother of Chairman Koo Bon-moo and older brother of Chairman Koo Bon-jun. Heesung is an LG-affiliated business group spun off from LG. Its name is said to be derived from the last characters of the old names for LG, Lakhee (樂喜) and Geumseong.