Shin Dong-bin, the imprisoned chairman of the Lotte Group, is expected to have another round of proxy contest with his elder brother Shin Dong-ju at a general shareholders' meeting of Lotte Holdings in Japan.
Shin Dong-ju, a former vice chairman of Lotte Holdings and currently president of Kohjinsha, a major shareholder of Lotte Holdings, introduced a shareholder proposal in April to dismiss chairman Shin Dong-bin. His proposal will be discussed at a general shareholders' meeting of Lotte Holdings on June 29. Shin Dong-ju also proposed the dismissal of Takayuki Tsukuda, president of Lotte Holdings and one of the closest aides of chairman Shin Dong-bin, and the re-election of himself as a director of Lotte Holdings.
In the face of the offensive from his hostile elder brother, chairman Shin Dong-bin has not been able to come up with proper countermeasures as he is now behind bars. Yet Lotte officials say that former vice chairman Shin Dong-ju has a fat chance of removing his younger brother from the board of Lotte Holdings as he has already lost proxy contests many times and is not trusted by the management of Lotte Holdings.
However, some experts in the Korean business world say that as Japanese society holds corporate executives to a higher moral standard than Korea, there could be some opposition to the imprisoned chairman.
Currently, Kohjinsha is the largest shareholder in Lotte Holdings with a 28.1 stake, followed by the Employee Stock Ownership Plan with a 27.8% stake, affiliated companies with an aggregate stake of 20.1% and the Executive Stock Ownership Plan with a 6% stake.
Since Shin Dong-ju is the largest shareholder of Kohjinsha, the management right to Lotte Holdings could go to him depending on the decision of the Employee Stock Ownership Plan. Until now, such a possibility has not materialized as Masamoto Kobayashi, chief financial officer (CFO) of Lotte Holdings and another close aide to chairman Shin Dong-bin, exercises a great influence on the Employee Stock Ownership Plan. However, the absence of chairman Shin Dong-bin could make a change in this structure.
"Shin Dong-ju has been trying to make the Employee Stock Ownership Plan his ally," said an official in the Korean business world. "As Japanese society is sensitive to the moral standard of top managers, it is highly possible that former vice chairman Shin Dong-ju has asked for help from the Employee Stock Ownership Plan again."
"Chairman Shin should not only prevent his elder brother from returning to the board but make sure that the proposal for his dismissal is voted down at the general shareholders meeting," another official said. "Otherwise, the Lotte Group is highly likely to be thrown into turmoil again."