[The Editors' Verdict] The Limits of "Pasture Management" That Led SK

A high-ranking government official who worked at SK Group in the late 2000s recently described SK's management culture at the time as "pasture management" in a private conversation. He took a leave of absence to gain experience in the private sector and joined SK for two years, likening SK's somewhat loose approach, unlike other groups, to "pasturing."

It seems that the sense of pasture management was not felt only externally. Shin Heon-cheol, former president of SK Inc., also mentioned this in a 2006 interview with the media. He said, "In 1983, we poured over 3 million dollars into oil field operations, but not a single drop of oil came out," adding, "Chairman Choi Jong-hyun still pushed forward. Later, we called that 'pasture management'." He explained that it means letting the cattle graze freely, implying that even if there is failure, they keep trying.

The "pasture" style of SK management aligns with the company's core value and unique philosophy of "together yet separately." Subsidiary management is conducted "separately" centered on the board of directors, but to realize mutual cooperation concretely, the group leadership meets through the SUPEX Council to act "together." This is SK's exclusive group operation method. It is fully embodied in the SKMS management system. The operating principle is that members voluntarily and enthusiastically engage in intellectual activities for everyone's happiness. Chairman Choi established SKMS in 1979, calling it "SK's unique management technique."

SK achieved vertical integration from petroleum to textiles by acquiring Korea National Oil Corporation (KNOC) in 1980 and experienced rapid growth by acquiring Korea Mobile Telecommunications in 1994. This was thanks to a corporate culture that challenges again even after failure.

However, finding innovation in pasture management has become increasingly difficult. Refining and mobile telecommunications are national key industries. This means they can secure stable profits without pioneering overseas export markets. Until acquiring Hynix in 2012, SK was tagged as a "domestic market company." The high-ranking official who mentioned "pasture management" also evaluated it as "more bureaucratic than government officials."

Autonomous management among subsidiaries led to overlapping investments. This issue arose as each company ventured into developing new revenue sources. In the LNG business, SK E&S and SK Gas overlapped, and the hydrogen business also became blurred in scope. In the electric vehicle sector, SK On handles the battery business, but anode materials are pursued separately by SK Materials and SKC. In the electric vehicle charging business, SK Energy, rental car services, E&S, and Signet are all involved. However, due to the subsidiaries' philosophy of autonomous management, the group has been passive in organizing these overlaps.

Pasture management, which has led SK for over 40 years since the establishment of the management system, now stands at a crossroads. The public's attention is focused on the SK management strategy meeting scheduled for the 28th and 29th because of the possibility of a major shift in management philosophy. There has already been an interpretation that the owner family has stepped to the forefront of management with the emergence of Chairman Choi Chang-won of the SUPEX Council. A business community insider familiar with Chairman Choi's tendencies said, "It seems he has made a firm decision."

Even Chairman Choi Tae-won's remarks have become more intense compared to the past. Chairman Choi recently reiterated his 2016 statement, "Deep change or sudden death." This is stronger than the message in his 1998 inauguration speech as group chairman, which said, "Deep change or slow down." It is a warning that the group could suddenly disappear, not just fall behind. Change is inevitable for survival. This is why this management strategy meeting is receiving special attention.