Past Chaebol Family Inheritance Disputes
Leading to Management Control Conflicts
The mother and younger sister of Koo Kwang-mo, chairman of LG Group, have filed a lawsuit to redistribute the inherited assets, drawing renewed attention to past cases of family business management disputes. It remains uncertain whether the LG Group inheritance dispute will escalate into a battle for management rights. Past cases show that inheritance disputes ultimately led to management rights conflicts.
A well-known early case of inheritance disputes within families is the multi-trillion won lawsuit between Lee Maeng-hee, honorary chairman of CJ Group, and his younger brother Lee Kun-hee, former chairman of Samsung. In 2012, honorary chairman Lee Maeng-hee, along with his younger sister Lee Sook-hee and others, filed a lawsuit demanding the transfer of stocks worth around 4 trillion won from former chairman Lee Kun-hee.
This was an expression of refusal to concede the inheritance left by their father, Lee Byung-chul, Samsung's founder, to his younger brother. Although honorary chairman Lee Maeng-hee lost in the first and second trials and gave up on appealing, the case attracted public attention because if former chairman Lee Kun-hee had lost, it could have shaken the group's governance structure.
Lee Maeng-hee, Honorary Chairman of CJ Group (left), Lee Kun-hee, Former Chairman of Samsung Electronics. [Photo by Asia Economy DB]
The trial also influenced the succession method of former chairman Lee Kun-hee's management rights. Of the Samsung Life Insurance shares, the largest shareholder of Samsung Electronics, about half (10.38%) of the 20.76% held by former chairman Lee Kun-hee was transferred to Chairman Lee Jae-yong. Additionally, sisters Lee Boo-jin and Lee Seo-hyun inherited 6.92% and 3.46% respectively. Hong Ra-hee was excluded from the inheritance.
This structure ensured that the successor received a clearly larger share while other siblings were not left dissatisfied.
Jeong Mong-heon, former chairman of Hyundai Group. [Photo by Asia Economy DB]
Although not an inheritance dispute, there have been cases where families openly fought over management rights. Examples include the "Prince's Rebellion" in Hyundai Group and succession disputes in Lotte Group.
In Hyundai, a dispute arose between honorary chairman Chung Mong-koo of Hyundai Motor Group and former chairman Chung Mong-hun of Hyundai Group over the successor position of honorary chairman Chung Ju-yung. When Chung Mong-koo took the automobile business and other assets, Hyundai Group, which was once ranked first in the business world by fair asset value, had to yield that position to Samsung.
Shin Dong-bin, Chairman of Lotte Group (right), and Shin Dong-ju, Chairman of SDJ Corporation (former Vice Chairman of Lotte Holdings Japan). [Photo by Asia Economy DB]
In the case of Lotte Group, Shin Dong-bin, the second son of honorary chairman Shin Kyuk-ho and chairman of Lotte, clashed with his older brother Shin Dong-joo, chairman of SDJ Corporation (former vice chairman of Lotte Holdings Japan), leading to nationality controversies. It became widely known that Lotte Holdings Japan and Kwang Yoon Corporation have significant influence over the group's governance structure. Currently, the largest shareholder of Hotel Lotte, the second-largest shareholder of Lotte Holdings, is Lotte Holdings Japan (19.07%). The largest shareholder of Lotte Holdings Japan is Kwang Yoon Corporation (28.1%).
Although the business restructuring is now accelerating around electric vehicle batteries (Lotte Chemical), when the retail affiliates accounted for a large portion of sales in the past, there were criticisms that the group needed to shed its "Japanese company" image.
LG made efforts to avoid family conflicts, even parting "beautifully" with in-law company GS and family company LS Group. Former chairman Christel Philips, who established the $1.65 billion (about 2.2 trillion won) joint venture LG Philips LCD with LG in 1999, said, "I was deeply impressed to see the Koo and Heo families managing the business as partners for over 50 years without any noise."
This implied that LG was considered trustworthy because the family did not fight. However, the story has now changed somewhat.
This LG inheritance recovery lawsuit could lead to a management rights dispute. If the court adjusts the inheritance shares as claimed by Chairman Koo's mother, Kim Young-sik, and younger sisters Koo Yeon-kyung, head of the LG Welfare Foundation, and Koo Yeon-soo, a significant portion of Chairman Koo's shares would transfer to the three women.
LG Group believes this situation will not escalate into a management rights dispute. Chairman Koo's shares in LG Corporation are a means for him to exercise voting rights as the representative of the LG family, not assets that other family members can arbitrarily dispose of. An LG official said, "It is unacceptable to demand property division and shake LG's tradition and management rights."
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