LG to face new management centering on heir Koo Kwang-mo
[THE INVESTOR] The nation’s fourth-largest conglomerate LG Group will face new management centering on its heir apparent Koo Kwang-mo after his adoptive father and group Chairman Koo Bon-moo died on May 20.
Koo Kwang-mo is the son of the late Koo’s younger brother Koo Bon-neung. Under LG’s strict principle of excluding women from the management, Koo Kwang-mo was adopted in 2004 by the late Koo, who lost his only son in a car accident.
Former US President Barack Obama(left) and late LG Chairman Koo Bon-moo.
LG Group’s low-profile heir steps into the limelight
The heir apparent, who is currently an executive at LG Electronics, was hurriedly appointed a member of the company’s board last week, when his father was hospitalized in a critical condition.
“It is true the group will face new management centering on Koo Kwang-mo with six professional CEOs serving complementary roles. After certain procedures, he is expected to participate in key decision making of the group’s businesses,” said a senior official from LG on the condition of anonymity.
The six CEOs are LG Corp. Vice Chairman Ha Hyun-Hwoi, LG Electronics chief Jo Seong-jin, LG Display head Han Sang-beom, LG Household & Health Care leader Cha Suk-yong, LG Uplus CEO Kwon Young-soo and LG Chem CEO Park Jin-soo.
Koo’s appointment has to be approved at an extraordinary shareholders’ meeting on June 29. However, due to his relatively short experience, “it is doubtful he will be at the forefront of the group’s management immediately and dramatically,” said the insider.
Koo is in his early 40s, and it has been only five years since he became an executive. He joined LG Electronics in 2006 and has since worked for its US office, home and entertainment division and home appliance division. He is currently chief of LG Electronics’ information display business division.
A LG insider said Koo might lead a separate affiliate after a certain period of time as the former owners did. He may oversee a separate business from LG International Corp, the bio sector of LG Chem or LG Display, according to industry watchers.
As part of another aspect of LG Group’s traditional management succession, Koo Bon-Joon, current vice chairman of LG Group and younger brother of the late Koo, is expected to leave his post.
Under LG’s tradition so far, when an eldest son of the head takes over the management, other brothers leave the management. Koo Bon-joon might become independent by separating an affiliate or a business division with his 7.72 percent stake of LG Corp. It is not certain whether he would do so immediately or after a two- to three-year transition period.
“For LG, there will seem to be little conflict in management succession, such as a feud between brothers for control, compared to other conglomerates. Even for the board of directors, more than 40 percent of them are management shareholders (familiar with LG’s leadership and tradition),” said Park Ju-guen, head of corporate analysis group CEO Score.
However, issues related to Koo Kwang-mo’s stake in the company and inheritance tax remain.
Koo Kwang-mo is currently the third-largest shareholder of LG Corp., with a 6.24 percent stake. The late Koo Bon-moo held an 11.28 percent stake, while Koo Bon-joon holds a 7.72 percent stake.
When he inherits the entire stake from the late Koo Bon-moo, he will become the largest shareholder of the group, but the inheritance tax is estimated to be around 1 trillion won ($924 million), according to industry watchers.
Under the nation’s tax law, a 50 percent tax is imposed when the inheritance is more than 3 billion won. The value of the late Koo’s 11.28 percent stake is estimated to be around 1.9 trillion won.
By Shin Ji-hye / The Korea Herald (firstname.lastname@example.org)