[Business & Issues] The Unending Spark of Ourhome's 'Sibling Rivalry'

No Majority Owner, Vulnerable to Management Disputes
Eldest Daughter as CEO: "Sale to Professional Manager"
Key Issue: Penalty Clause Lawsuit Among Three Sisters

[Image source=Yonhap News]

Ourhome, which had been experiencing turmoil amid a management dispute among the owner's siblings, has seen the dispute come to a temporary end with the rise of new CEO and Chairperson Gumi-hyun. However, the possibility of the dispute flaring up again is emerging as Chairperson Koo declared the sale of management rights immediately after taking office. Since none of the four siblings sharing Ourhome shares holds a majority stake alone, alliances and realignments can easily form depending on interests, making a smooth sale unlikely going forward.

Shares Divided in a 4:2:2:2 Ratio, Emerging as the Cause of Sibling Disputes

Ourhome was established when the late Chairman Koo Ja-hak spun off the food service division of LG Distribution (now GS Retail) in 2000. Chairman Koo had four children: eldest son Koo Bon-sung, new Chairperson and CEO Gumi-hyun, second daughter Koo Myung-jin, former Calisco CEO, and youngest daughter Koo Ji-eun, former Vice Chairperson.

Upon founding Ourhome, Chairman Koo distributed shares among the four siblings. Overall, the eldest son received a 4-part share, while the three daughters each received 2 parts. According to the consolidated audit report of Ourhome disclosed in the Financial Supervisory Service's electronic disclosure system at the end of last year, the share distribution was: Koo Bon-sung 38.6%, Gumi-hyun 19.3%, Koo Myung-jin 19.6%, Koo Ji-eun 20.7%, and others 1.89%.

This distribution was reportedly based on the traditional eldest-son succession principle known within the LG Group owner's family, but none of the four siblings held a majority stake. Eldest son Koo Bon-sung needed to ally with at least one sibling to maintain majority control, while the three sisters could unite to overturn the eldest-son succession principle.

Amid this unstable share structure, a management dispute erupted between former Vice Chairperson Koo Ji-eun and former Vice Chairperson Koo Bon-sung, causing repeated chaos. In 2021, Koo Bon-sung was sentenced to six months in prison with a two-year probation for retaliatory driving that damaged another vehicle and injured the driver. At that time, new Chairperson Gumi-hyun allied with her siblings to use their majority shares to dismiss Koo Bon-sung at the regular shareholders' meeting. Subsequently, Koo Ji-eun served as CEO from June 2021.

However, new Chairperson Gumi-hyun succeeded in taking control of management by allying with her older brother. At the Ourhome extraordinary shareholders' meeting held on the 31st of last month, former Vice Chairperson Koo Ji-eun failed to extend her term as an inside director and eventually stepped down. On the 18th, the board of directors appointed Gumi-hyun as the new CEO and Chairperson.

First Thing After Becoming CEO, Eldest Daughter Announces Sale of Management Rights: "Should Entrust to Professional Management"

After a series of twists and turns, new Chairperson Gumi-hyun, having secured management control, sparked controversy by announcing plans to sell the management rights as her first official statement. In her inauguration speech posted on the company bulletin board on the 18th, Chairperson Koo stated, "The fundamental way to end the management dispute among shareholders is 'rational company management by professional management,' that is, 'transfer of management rights to a professional company aiming for sustainable business development.'" She further promised, "We will formalize the transfer of major shareholders' shares, including myself, to a competent professional company while ensuring the succession of employment and status protection for Ourhome employees."

With the management rights sale becoming official, concerns are rising that Ourhome may be excluded from the broader LG Group companies after the ownership change. Additionally, there are forecasts that the performance growth trend of Ourhome, which emerged under former CEO Koo Ji-eun's leadership last year, may falter. Last year, Ourhome's consolidated sales reached 1.9835 trillion KRW, an 8% increase from the previous year, and operating profit surged 76% to 94.3 billion KRW.

Ourhome employees have also expressed anxiety over the possibility of a sale. On the 31st of last month, the Ourhome Labor Union of the Korean Federation of Food Industry Trade Unions strongly criticized Chairperson Gumi-hyun and former Vice Chairperson Koo Bon-sung, stating, "Those who have never participated in management and have no interest in company growth are occupying the company."

Many Obstacles to Overcome for Management Rights Sale... Breach Penalty Lawsuit is Key

Gu Ji-eun, former Vice Chairman of Ourhome

There are still hurdles to overcome regarding the sale of management rights. In particular, the shareholders' voting rights integration agreement signed by the three sisters when dismissing former Vice Chairperson Koo Bon-sung in 2021 is expected to be a major obstacle. The agreement stipulates that the three sisters?Gumi-hyun, Koo Myung-jin, and Koo Ji-eun?jointly exercise voting rights on matters such as director appointments and dividend proposals, and any shareholder violating the agreement must pay a penalty of 30 billion KRW per voting rights violation to the other shareholders.

Before the shareholders' meeting in April, former Vice Chairperson Koo Ji-eun filed an injunction against new Chairperson Gumi-hyun, alleging violation of the agreement, but it was dismissed. However, since the agreement has not been nullified, there remains a possibility that Koo Bon-sung's side may file a main lawsuit depending on future developments. So far, Chairperson Gumi-hyun has violated the agreement by exercising voting rights alone twice, and if the main lawsuit proceeds and she loses, she may have to pay 60 billion KRW in penalties to her sisters Koo Ji-eun and Koo Myung-jin.

Even if the sale of management rights succeeds, the presence of a hostile second-largest shareholder faction from the perspective of new Ourhome shareholders poses a concern for investment firms, including private equity funds. Combining the shares of siblings Koo Bon-sung and Gumi-hyun amounts to 57.84%, but the sisters Koo Myung-jin and Koo Ji-eun still hold 40.27%. If the sisters ally with other forces to purchase shares, there remains a risk of renewed disputes even after the management rights sale.