Lotte heir dragged from helm in Japan

Lotte heir dragged from helm in Japan

Shin Dong-joo, the eldest son of Lotte Group founder and general chairman Shin Kyuk-ho, on Thursday was fired from vice chairmanship at Lotte Holdings in Japan, virtually descending from all managerial positions at his father's business empire that spans from South Korea and Japan to across Asia and even the US.

According to Lotte Holdings, Shin was voted off at a meeting of the board of directors for undisclosed reasons.

The news came two days after revelations that he was sacked from executive positions at three Lotte affiliates in Japan last month. Lotte offices in Japan and Korea declined to provide details of Shin's dismissal.

Shin's departure complicates the future of fraternal competition to succeed the 93-year-old senior Shin, observers say.

It had been widely expected that Dong-joo would take over Lotte in Japan while his younger brother and Lotte chairman Shin Dong-bin would take over the Korean unit. The brothers hold similar amounts of stocks at Lotte affiliates, with Dong-joo taking a slightly higher portion in Japanese units and Dong-bin taking a marginal lead in Korean businesses.

However, since Lotte Holdings holds the lion's share of Lotte Hotel, which serves as the de facto holding company of Lotte Group here, Dong-joo was perceived as the eventual successor of both the 87.5 trillion won (S$115 billion) Lotte Korea and 7 trillion won Lotte Japan.

Critics suggest that the elder son may have rubbed his father ― known to be fierce and stern in his offspring upbringing ― the wrong way.

Dong-joo gained public attention when he started buying up stocks in Lotte Confectionery, one of the main axes of the cyclical shareholding structure of Lotte Korea, over seven stages last year. It was also widely assumed that he was looking for friendly shareholders, igniting speculations that he was trying to catch up with his younger brother's shares in Korea.

Critics suggested that this may have been perceived as defying his father's succession plan.

Lotte's less-than-impressive performance in Japan may have caused the drastic measures. While Lotte Korea reported 83 trillion won in sales in March 2014, the Japanese unit reported less than 6 trillion won that month. Moreover, the Japanese vernacular Nihon Keizai Shimbun reported that the truth behind Dong-joo's fall lies in his conflict with Lotte Holdings CEO Takayuki Tsukuda.

"While Dong-bin, who took the Korean unit's helm in 2011, ventured into diversification, Dong-joo seemed to have focused on the confectionery market, which could have possibly resulted in the stark sales comparison," a market insider said.

But pundits remained optimistic for Dong-joo.

"Shin Kyuk-ho may want to teach his son a lesson, but Korean business magnates do not give up on their children that easily. Dong-joo will be fine in the end," another market watcher said.

 

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