Shin Dong-ju's Rebellion vs Shin Yoo-yeol's 'One Lotte' Foundation... Key Points to Watch at the Japanese General Meeting of Shareholders

Shin Dong-joo Proposes Agenda for Director's Return at Regular General Meeting
Younger Brother Shin Dong-bin Submits Motion to Dismiss Lotte Group Chairman
Opposes Nephew Shin Yu-yeol's Director Appointment Proposal

On the 26th, the regular shareholders' meeting of Japan's Lotte Holdings is drawing attention from the business community. At this shareholders' meeting of Lotte Holdings, the Japanese holding company of Lotte Group, SDJ Corporation Chairman Shin Dong-joo once again attempted to return to management, while Shin Dong-bin Chairman's eldest son, Executive Director Shin Yu-yeol, was appointed as an inside director of Japan's Lotte Holdings, marking the start of a full-scale succession process.

Japan's Lotte Holdings is scheduled to hold its regular shareholders' meeting in Tokyo on this day and vote on the proposal to appoint Executive Director Shin. Prior to the meeting, Chairman Shin Dong-joo proposed his own director appointment and the dismissal of Chairman Shin Dong-bin, and the vote will take place at the meeting.

Chairman Shin Dong-joo was abruptly dismissed from the position of vice chairman of Lotte Holdings, the Korea-Japan Lotte holding company, in January 2015. On July 27 of the same year, backed by the late Chairman Shin Kyuk-ho, he attempted to regain management control by dismissing his younger brother, Chairman Shin, from the board of Lotte Holdings, but failed. Since then, until last year, he has attempted nine times at Lotte Holdings shareholders' meetings to dismiss Chairman Shin and return to his director position, but was repeatedly rejected.

Former Vice Chairman of Lotte Holdings Japan, Shin Dong-ju (left), and Chairman of Lotte Group, Shin Dong-bin (right).

The vote on Chairman Shin Dong-joo's director appointment proposal at Lotte Holdings shareholders' meetings marks the 10th time since the management dispute in 2015. The prevailing view is that there will be no reversal at this shareholders' meeting either.

According to the Financial Supervisory Service's electronic disclosure system, the largest shareholder of Lotte Holdings is Kwangyunsa (28.14%). The remaining shares are held by affiliates excluding Kwangyunsa (27.8%), executive shareholders' association (5.96%), employee shareholders' association (27.8%), and Chairman Shin's family. Combining the shares of Kwangyunsa and Executive Director Shin yields 29.91%. Chairman Shin's friendly shares, including the employee shareholders' association, amount to 53.6%.

The possibility of the casting vote by the employee shareholders' association turning against is also slim. When Chairman Shin Dong-joo was CEO of Lotte Service, he pushed forward the so-called 'Pullica' business, which involved photographing product displays at retail stores for marketing purposes. Between 2014 and 2015, he was dismissed from the boards of Japan's Lotte, Lotte Trading, Lotte Property & Development, and Lotte Real Estate. This was because the Pullica business was considered a kind of hidden camera with legal issues, and he was found to have falsely reported this to Chairman Shin Kyuk-ho. At that time, Executive Director Shin even filed a damages lawsuit against the companies that dismissed him but lost all cases. The consensus in the business community is that he lost trust among employees through this process.

The highlight of this shareholders' meeting is the appointment of Executive Director Shin Yu-yeol as an inside director of Japan's Lotte Holdings. Executive Director Shin was promoted to head of the Future Growth Office at Lotte Holdings in last year's regular personnel reshuffle, stepping into the forefront of management. In February, he was appointed as an inside director of Lotte Biologics. If he is named as an inside director of Japan's Lotte Holdings this time, he will be listed on both the Korean and Japanese Lotte holding companies.

The Lotte governance structure connects Kwangyunsa → Lotte Holdings → Hotel Lotte → Lotte Holdings, etc. Although the influence of Japan's Lotte has diminished in the governance structure with the launch of Lotte Holdings, where Chairman Shin Dong-bin is the largest shareholder, it is necessary to strengthen Japan Lotte's control considering the group's long-cherished project of listing Hotel Lotte. Chairman Shin Dong-bin has been promoting the 'One LOTTE' strategy, an integrated Korea-Japan management system. Executive Director Shin, who joined the board of Japan's Lotte Holdings, will carry this forward. Earlier, on the 4th, Executive Director Shin purchased 7,541 common shares of Lotte Holdings, securing a 0.01% stake (195.04 million KRW), officially starting the management succession.

Chairman Shin Dong-joo has already announced opposition to the proposal to appoint Executive Director Shin as an inside director at this shareholders' meeting.