The conviction on charges of bribery for the chairman of South Korea’s Lotte Group last week has resulted in the chairman resigning from the post of chief executive of its Japan-based holding company.
The Lotte Group said in a statement that chief executive Shin Dong-bin’s resignation was accepted by the board of Lotte Holdings after a meeting of the board members on Wednesday. The group further said that tis resignation and its acceptance is a reflection of a long drawn tradition in Japanese business circles of resignation and stepping down of chief executives who have been convicted. The group further said in the statement that this resignation by Mr Shin would not impact or change any of his status in the Korean units of the Lotte Group and he has also been retained at the position of vice-chairman for Lotte Holdings.
The retail-focused conglomerate Lotte has a complex ownership structure and at the core of that structure is Lotte Holdings. It is this company that makes use of cross shareholding strategies to exercise indirect control over the most important businesses of the group in South Korea that includes the Lotte Hotel and Lotte Chemical.
Last week, a South Korean court had sentenced Mr Shin to prison for two and a half years on charges of bribery and the resignation by Mr Shin as chief executive of the holding company follows that court ruling. That ruling is also being viewed as a strong signal and a warning for the elites in the polity and business field in South Korea. The court adjudged Mr Shin to have committed the crime of bribing and offering to bribe a sum of 7 billion Won to foundations that were owned and run by the long-time confidant to the former South Korean president Park Geun-hye. Mr. Shin had been granted political favors in return.
There is a potential for negative impacts on the business cooperation and synergies that existing between the business operations that are conducted by the group in South Korea and those that are done in Japan by the resignation of Mr Shin, Lotte said.
The verdict is being contested through an appeal by Mr Shin. The group had been attempting to restructure itself and this conviction and resignation legal issues of Mr Shin could restart a family feud related to gaining control over the management of the South Korean business of Lotto which is the fifth-largest conglomerate kinit heh country. The group wide restructuring efforts can also potentially be slowed down by tis unforeseen event.
There has been increasing losses for the group from its operations in China and there are many who believe that the major investment plans of the company following those losses could get jeopardized due to the conviction of Mr. Shhin, according to some Lotte officials.
(Adapted from FT.com)