Possibility of Returning to Frontline Management in the First Half of This Year
First Management Participation in 12 Years
Taekwang Group Implements Reform Measures and Embraces Change Trend
Former Taekwang Group Chairman Lee Hojin is reportedly set to return to the forefront of management by the first half of this year at the latest. Inside Taekwang, the timing of his return is being closely monitored. Amid recent moves to shed the image of a ‘reclusive company,’ such as recruiting governance experts as outside directors, there is a growing expectation that the group’s management will undergo significant changes with Lee’s comeback.
According to a comprehensive report by Asia Economy on the 18th, Lee is considering a scenario where he returns to management once the police investigation into charges of breach of trust and embezzlement is concluded. Currently, Lee is under investigation by the Anti-Corruption and Public Crime Investigation Unit of the Seoul Metropolitan Police Agency for allegedly creating tens of billions of won in slush funds by mobilizing group affiliates and improperly supporting construction costs for affiliates through Taekwang Country Club (Taekwang CC).
Business and legal circles widely believe there is a high possibility that Lee will be cleared of charges. This is because there is no clear evidence or circumstances that substantiate the allegations. Even if the case is forwarded to the prosecution after the police investigation, it is expected that Lee will either not be indicted or will be acquitted in court. If the police close the investigation with a no-charge decision and hand the case over to the prosecution, conditions will be created for Lee to dispel uncomfortable public perceptions and return to management.
If Lee participates in management during the first half of the year, it will mark his first involvement in 12 years. He stepped down from the chairman position in 2012 after being legally detained in 2011 on charges of breach of trust and embezzlement and has not been involved in management since. Although Lee was expected to rejoin management after being granted a special pardon on Liberation Day last year, he postponed his return, deciding first to address internal company issues triggered by the corruption of Kim Giyu, former chairman of the Taekwang Group Management Council and Lee’s close confidant.
Kim was the second-in-command of the group, trusted by Lee. He emerged in 2007 to assist Taekwang Group, which was expanding the scope of Taekwang CC by building a clubhouse and other facilities. At that time, when construction related to Taekwang CC was stalled, in March 2007, Kim was appointed as the CEO of Taekwang Tourism Development (now TCIS), the affiliate operating Taekwang CC, and was tasked with overseeing the construction to resolve the issue. This connection brought Kim and Lee closer as they discussed group affairs together.
However, after Lee’s special pardon last year, a large-scale internal audit revealed Kim’s true nature. According to a Seoul Central District Court ruling in October last year, when Whistling Rock’s financial situation worsened in 2013, Kim orchestrated a scheme from April 2014 to September 2016 in which TCIS, operating Whistling Rock, sold kimchi produced by the company at inflated prices to 19 affiliates and employees, pocketing approximately 9.5 billion won. Kim was indicted for this case and was fined 40 million won in the first trial. Both Kim and the prosecution have appealed, and the second trial is pending. In May 2014, Kim also established a management planning office that did not previously exist, appointed himself as its head, and exercised control over large-scale investments, business structures, and personnel decisions, effectively controlling the entire group.
Upon uncovering these facts, Taekwang Group dismissed Kim in September last year and reported him to the prosecution. The Western District Prosecutors’ Office’s Criminal Division 4 is currently investigating Kim. The police investigation into Lee began when Kim filed a complaint against Lee to counter the group’s accusations against himself.
With Lee’s return, various group investment plans are expected to get back on track. Taekwang Group announced in 2022 a plan to invest 12 trillion won over ten years in various businesses. By 2032, it plans to invest 6 trillion won in petrochemicals, 4 trillion won in textiles, and 2 trillion won in finance and media. Taekwang Industrial is also expected to actively pursue mergers and acquisitions (M&A) and technology licensing agreements going forward.
Taekwang Group has recently shown signs of change by implementing reform measures. The parent company, Taekwang Industrial, expanded its board of directors from five to seven members to strengthen board-centered management. The board now consists of three inside directors and four outside directors. The company amended part of its articles of incorporation to formalize the establishment of an ESG committee and specify the separate appointment of audit committee members, thereby instituting transparent management mechanisms. At last month’s shareholders’ meeting, activist fund Truston Asset Management recommended Professor Kim Woojin of Seoul National University and Executive Director Ahn Hyoseong of accounting firm Sejong as outside directors, and Jeong Ansik, head of the sales division, was appointed as an inside director. Professor Kim is a capital market expert who has studied corporate governance for over 20 years. Seong Hoeyong, CEO of Taekwang Industrial and vice chairman of the Taekwang Group Management Council, officially took office as president through last month’s shareholders’ meeting.
However, the group remains cautious about Lee’s return. A group official said regarding Lee’s return to management, "There is no concrete discussion at this time," adding, "We need to observe the situation."
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