Shin Dong-joo, the eldest son of Lotte Group founder Shin Kyuk-ho, has been ousted from his position as vice chairman at Lotte Holdings, after disobeying his father and increasing his stakes in a subsidiary of the Korean conglomerate.
According to a company statement, the decision was made during a shareholders’ meeting last Thursday and puts Shin Dong-bin, the younger son of the group’s founder, in line to succeed control of the conglomerate.
The press release did not reveal why Dong-joo was removed from his position but media reports speculate that the former vice chairman broke a tacit agreement with his brother that required him to maintain his current ownership stake.
Dong-joo had, up until August last year, been increasing his stake in the Korean affiliate Lotte Confectionery through 12 share purchases. Dong-joo’s share increased from 3.48% to 3.92% over the period. In response, Dong-bin also raised his stake to 5.34 percent.
"It seems that [Shin Kyuk-ho] disapproved of his eldest son's actions. When Dong-joo showed an intention to expand his reach here, the senior Shin decided to dismiss him," an anonymous executive at one of the country's major business associations said in a Korea Times article.
However, the dismissal is not likely to be the last word in the story as Dong-joo holds significant stakes in holding company Lotte Confectionary, which is a critical part of Lotte’s complicated shareholding structure.
The 93-year-old founder is also said to be in poor health and is yet to officially announce a successor. There is an expectation that the situation could develop into a full-blown sibling feud as seen in the Doosan and Samsung groups.
Shin Kyuk-ho founded Lotte in Japan in 1948 as a snack maker. The group entered South Korea in 1967 and has grown into the country’s fifth-largest conglomerate, with interests in retail and publishing.
Lotte Korea reported 83 trillion won ($81 billion) in sales for 2013, with its Japanese sister achieving less than 6 trillion won in sales. The company recently opened the Lotte World Mall in southern Seoul and is planning to open multiple shopping malls in Southeast Asia.