Friday, February 21, 2020
Management Disputes Going On in Hanjin Group
Sibling Conflict over Managerial Control
Management Disputes Going On in Hanjin Group
  • By Jung Min-hee
  • December 24, 2019, 08:36
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Former Korean Air vice president Cho Hyun-ah has criticized her younger brother Korean Air CEO Cho Won-tae for running Hanjin Group not in compliance with the will of the late Hanjin Group chairman and their father Cho Yang-ho.

Former Korean Air vice president Cho Hyun-ah said on Dec. 23 that Korean Air CEO Cho Won-tae has run Hanjin Group not in obedience to the will of the late Hanjin Group chairman Cho Yang-ho and has hindered family conversations related to the management of the group.

Her statement, aimed at putting the brakes on his management, is something that has been predicted by many. This is because four bereaved family members inherited the late chairman’s Hanjin KAL shares almost equally and their shareholdings in the group are showing little difference. Hanjin KAL is the de facto holding company of the group.

The family feud is likely to take one of two directions. One is the four family members’ joint management based on an appropriate division and the other is a showdown at the shareholder meeting scheduled for March next year.

It is said that she publicly put pressure on him in order to return to management and, as such, the first possibility is more likely. She stepped down for the so-called nut rage incident in 2014 and returned as the president of KAL Hotel Network in March last year. In less than a month, she stepped down again for the owner family’s wrongdoings.

Then, the court acquitted her of luxury goods smuggling and illegal foreign housekeeper hiring charges. Her mother, former Ilwoo Foundation director Lee Myung-hee accused of the same charges, was appointed as an advisor to Hanjin Group’s building management company in June this year with her younger sister Cho Hyun-min returning as a Hanjin KAL senior managing director. Under the circumstances, the former Korean Air vice president was predicted to return to the group as well. However, she and her people such as Korean Air vice chairman Seok Tae-soo were ruled out of promotions recently given by the Korean Air CEO.

At present, each of the Korean Air CEO, the former Korean Air vice president and the senior managing director has a shareholding of approximately 6.5 percent in Hanjin KAL whereas Korea Corporate Governance Improvement (KCGI) is threatening their management rights with a shareholding of 17.29 percent. A change in management rights can occur depending on the movement of the former Korean Air vice president, her mother and Bando Engineering & Construction, which represents 6.28 percent of the company on their side. The Korean Air CEO’s allies include Delta Air Lines, which has 10 percent of the company and is yet to reveal its official stance.

If the owner family members unite, the friendly shares will rise to 41.07 percent and the owner family can take control of the group. However, the CEO’s rights will be jeopardized if the former Korean Air vice president and her mother turn their backs on him.

Rumor has it that KCGI will dispose of its shares and at least one IT company will acquire the shares. Someone may lose management rights depending on the latter’s movement. In other words, the family feud may lead to a change in the ownership of Hanjin Group.