Jeong Yong-jin Draws Sword, Shocking Dismissal of Shinsegae Construction CEO... Launching Management Innovation 'Start'

Sales Headquarters Director and Sales Manager Also Notified of Dismissal
Heo Byung-hoon, Executive Vice President of Management Strategy Office, Appointed as Successor
Financial Expert Appointment Strengthens Commitment to 'Responsible Management'

Jung Yong-jin, Chairman of Shinsegae Group, has abruptly dismissed Jung Doo-young, CEO of Shinsegae Construction. This is the first personnel reshuffle since his promotion to chairman last month. The move aims to kickstart innovation across the group by strengthening a personnel system focused on responsible management and performance-based principles.

On the 2nd, Shinsegae Group announced that it had dismissed the CEO of Shinsegae Construction and appointed Heo Byung-hoon, Executive Vice President in charge of overall management at the Management Strategy Office, as the new CEO. The head of sales and the sales manager were also dismissed.

Chung Yong-jin, Chairman of Shinsegae Group.

Shinsegae Construction has been experiencing a liquidity crisis due to sluggish sales performance amid a real estate market downturn. Last year, it recorded an operating loss of 187.8 billion KRW on a consolidated basis. This was the cause of the parent company E-Mart’s first-ever annual operating loss.

The newly appointed CEO, Heo Byung-hoon, born in 1962, joined Samsung Group in 1988 and has held positions such as the Management Diagnosis Team in the Restructuring Headquarters, Finance Manager at Samsung C&T, and CFO of the Americas division. From 2011, he moved to Hotel Shilla, serving as Head of Management Support and CFO, before joining Shinsegae Group in July 2018. Since then, he has held roles including Vice President in charge of Planning at the Strategy Office, Vice President in charge of Support, Vice President in charge of Management, Head of Planning and Strategy at the Department Store Division, and Head of Finance at the Strategy Office.

Shinsegae Group expects Heo, who has overseen the group’s financial management as Executive Vice President of the Management Strategy Office, to be the right person to restore Shinsegae Construction’s financial soundness. A Shinsegae Group official said, "Appointing Vice President Heo, the group’s key financial expert, as the new CEO of Construction expresses the group’s determination to take full responsibility for the construction division’s financial issues."

Byung-Hoon Heo, Vice President and CEO of Construction Division, Shinsegae Construction

This personnel change is actually the first major reshuffle carried out by Chairman Jung at the group level since his promotion. Since last year, Chairman Jung has emphasized a new personnel system based on fair compensation aligned with performance. Shinsegae Group plans to conduct frequent personnel changes for executives based on internally established Key Performance Indicators (KPIs). This system implies that CEOs can be replaced at any time depending on performance, breaking away from the traditional year-end regular personnel reshuffle framework.

KPIs quantify organizational or individual performance mainly through quantitative indicators, minimizing qualitative elements in performance measurement. In November last year, Chairman Jung reorganized the Management Strategy Office, which acts as the group’s 'control tower,' and established two dedicated teams under it: the KTF (K Task Force) and the PTF (P Task Force).

Shinsegae has been criticized for having a relatively weak performance compensation system among major groups. Accordingly, the K Task Force aimed to establish an objective and predictable 'Shinsegae-style' KPI that all members could agree on, while the P Task Force was tasked with completely innovating the existing personnel system based on this. Chairman Jung is known to have led the reorganization by frequently receiving reports on related work and directing improvements.

The new personnel system reflecting Chairman Jung’s philosophy is based mainly on appropriate rewards aligned with performance and a principle of 'reward and punishment.' Because of this, the retail industry expects that core affiliates such as E-Mart and Shinsegae Construction, as well as e-commerce affiliates like SSG.com and Gmarket that have yet to escape deficits, will be the first targets of the new personnel system.

Chairman Jung is expanding the group-wide effort to improve Shinsegae Group’s organizational structure. On the 25th of last month, E-Mart posted a company-wide voluntary retirement announcement. Employees with more than 15 years of service, including senior managers, managers, and assistant managers, are eligible. The package includes special retirement pay equivalent to 24 months’ salary (40 months’ base pay) and a living support fund of 25 million KRW. Earlier this year, E-Mart began accepting voluntary retirements at the soon-to-be-closed Sangbong and Cheonan Pentaport stores. Expanding voluntary retirement from individual stores to the entire company is a first since the company’s founding.

Meanwhile, Shinsegae Construction has recently focused on strengthening financial soundness by proactively securing liquidity far exceeding the funds due in the first half of the year through the absorption merger of Yeongnangho Resort, bond issuance, and the sale and purchase of the leisure division.

Heo plans to focus his capabilities on lowering the debt ratio and further improving financial stability through proactive responses to potential risks and continuous additional liquidity procurement, while also preparing long-term plans to strengthen business competitiveness.