[4 Major Groups Control Tower] LG Energy Solution Spin-off, LX Separation, Abeo Acquisition... Decisions After Holding Company CEO Koo Kwang-mo's Appointment

Owner Koo Kwang-mo, Chairman and CEO of the Board
Advisor Kwon Bong-seok, Structural Reform Including Mobile Phone Withdrawal
Balanced Placement of Strategy Hong Beom-sik and Management Ha Beom-jong... Participation in Affiliate Boards

Since his inauguration in 2018, Koo Kwang-mo, Chairman of LG, has overseen the spin-off of LG Energy Solution and the separation of the LX Group affiliates. He established the joint venture (JV) Ultium Cells with General Motors (GM) in the United States and founded the LG Artificial Intelligence (AI) Research Institute under the LG Management Development Institute. Notably, the acquisition of the U.S. cancer drug bio-venture Aveo Pharmaceuticals was a result strongly pushed through by Chairman Koo. All these achievements were accomplished within five years.

The secret to quickly processing major decisions is attributed to the fact that members of the board of directors of LG Corporation, which effectively serves as the group’s control tower, also concurrently serve as chairpersons of the boards of each affiliate, contributing to swift decision-making. The reason LG affiliates can confidently pursue long-term businesses, such as electric vehicle batteries that can take decades to yield results, is because the group head, as chairman of the holding company’s board, takes responsibility and strongly supports these initiatives.

Koo Kwang-mo, CEO of LG Corporation, is inspecting quantum computing experimental equipment with Christian Widbrook, CEO of Xanadu, at the Xanadu laboratory in Toronto, Canada, on the 22nd local time.
[Photo by LG]

Chairman Koo’s official title is CEO and Chairman of the Board of LG Corporation. The LG Corporation board consists of three inside directors, including Chairman Koo, Vice Chairman Kwon Bong-seok who is LG Corporation’s Chief Operating Officer (COO), and President Ha Beom-jong, head of LG Corporation’s Management Support Division, along with four outside directors. Although President Hong Beom-sik, head of LG Corporation’s Management Strategy Division, is not an inside director, he holds a strong presence as he reports directly to COO Kwon as head of the Management Strategy Division. The structure follows a chain of command from the group head → COO → COO’s subordinate strategy and management support divisions. When Chairman Koo approves key matters at the board, the COO and the strategy plus management support divisions under the COO quickly handle them.

COO Kwon and President Hong are known as 'strategy experts,' while President Ha is a 'finance expert.' This balance between strategy and management means there is little bias. In other words, strategic and management aides join forces to support the holding company CEO (group head). This is the driving force behind LG’s swift management activities without needing to create a control tower organization like Samsung’s Future Strategy Office or form a consultative body like SK’s SUPEX Council.

LG Group’s presidents’ meetings are held quarterly. This is not particularly frequent compared to other groups. However, key decision-makers at LG Corporation?Vice Chairman Kwon, Presidents Hong and Ha?exercise influence over major matters at each affiliate as board members. LG Group’s 63 affiliates are divided into three sectors: electronics, chemicals, and telecommunications services. Vice Chairman Kwon is a non-executive director at LG Electronics, LG Energy Solution, and LG Chem (electronics and chemicals). He also serves as chairman of the board at LG Electronics. President Hong is a non-executive director at LG Uplus, LG HelloVision, and LG CNS (telecommunications and services). President Ha is a non-executive director at LG Household & Health Care and LG Display (electronics and chemicals) and also serves as chairman of the board at LG Household & Health Care.

Vice Chairman Kwon Bong-seok of LG Corporation (second from left) poses for a commemorative photo with Ola K?llenius, Chairman of the Board of Mercedes-Benz Group, and Jung Ho-young, President and CEO of LG Display, on the 24th at the LG Display Research Building in LG Science Park, Magok, Gangseo-gu, Seoul.
They discussed the premium automotive organic light-emitting diode (OLED) business between the two groups.
[Photo by LG Display]

Vice Chairman Kwon is LG Group’s operations strategist. Since Chairman Koo’s inauguration, LG’s management has been summarized as 'selection and concentration,' strengthening B2B (business-to-business) businesses such as automotive electric and electronic components while exiting core solar and mobile phone businesses. Vice Chairman Kwon was deeply involved in this process.

For example, in April 2021, he directly announced at the LG Electronics board meeting the decision to exit the smartphone business. He led the workforce redeployment during the business closure. In July 2021, about 600 employees, or 18% of the approximately 3,300 staff in LG Electronics’ MC Business Division, were transferred to other group affiliates. Around 300 moved to LG Energy Solution, LG Chem’s battery subsidiary, and 300 were relocated to LG Uplus, LG Display, LG Innotek, LX Semicon, and others. The remaining approximately 2,700 were reassigned within LG Electronics.

At that time, Vice Chairman Kwon sent an email to MC Business Division employees promising, “We will proceed with redeployment by considering each individual’s relocation preferences as much as possible to secure business capabilities that enhance the future value of LG Electronics and the group.” In January 2021, he also reassured MC Business Division employees by saying, “Regardless of how the business operation direction is decided, employment will be maintained, so there is no need to worry,” helping to stabilize the organization.

This was possible because Vice Chairman Kwon is known for combining technical and marketing capabilities and for attentively listening to voices from the field. He has experience in the display sector, including the DID (digital signage) management planning group, monitor business division head, and HE (home entertainment) media business division head. He led the TV business as president of LG Electronics’ HE Business Division and supported LG Group affiliates’ businesses as synergy team leader at the holding company.

LG Corporation describes its role as “creating the group’s future business portfolio.” The recently presented 'A·B·C (AI, Bio, Clean Tech)' vision is the result. Although not explicitly stated, there is an internal perception that “if batteries are the business inherited from the previous chairman, AI and bio are Chairman Koo’s businesses.”

The acquisition of Aveo is cited as the management activity in which Chairman Koo, as holding company CEO, participated most strongly. The acquisition was made last October for $566 million (about 800 billion KRW). Within the group, great significance is placed on the fact that Aveo is not a generic drug company but a new drug manufacturer. An LG insider familiar with the situation said, “Before deciding on the Aveo acquisition, it was understood that Chairman Koo’s intention was reflected in the belief that bio is a future industry that will continue to grow for decades or centuries, and that LG’s strength lies in making long-term investments in future industries.”

The LG organization collaborating with Aveo is LG Chem’s Life Sciences Division. This organization grew as an independent affiliate called LG Life Sciences in 2002 but merged into LG Chem in 2017. A business community insider said, “LG Life Sciences alone could not have acquired Aveo. It was possible because after LG Life Sciences joined LG Chem, Chairman Koo emphasized the cancer drug business at the LG Corporation board.”

Placing the LG AI Research Institute under the LG Management Development Institute is also seen as a sign of LG Corporation’s influence. The AI market is a long-term business that does not generate much immediate profit. Instead of having affiliates engaged in AI business redundantly invest in AI research and development (R&D), the AI Research Institute is placed under the LG Management Development Institute, a group think tank, so that LG Corporation’s board manages it. This is a management policy reflecting Chairman Koo’s intentions. An LG official said, “AI has high growth potential and requires long-term investment, so it is a business managed by the holding company over the long term. Most of Chairman Koo’s A·B·C fields are also long-term businesses.”

Within five years of Chairman Koo’s inauguration, LG has acquired nine companies including Robostar, ZKW (automotive electronics), and Aveo (cancer drugs). It has also established seven joint ventures such as Ultium Cells (electric vehicles) and LG Magna (automotive electronics).

As of the previous day, the market capitalization of LG Group’s 11 listed affiliates was 223.3136 trillion KRW, a 162.7% increase from 85.0177 trillion KRW in 2018, the year Chairman Koo took office.