Sunday, August 30, 2015

Anti-Japan Backlash at Lotte

 Family feuds are relatively common among Korea’s giant, family-owned business conglomerates known as chaebol. Usually they involve the offspring of the patriarch fighting over who should succeed the founder.

One famous feud in the early 2000s for control of Hyundai ended only when the aging founder, Chung Ju-yong, died in 2001, and the conglomerate was split three ways.

The current family feud to succeed Shin Kyuk-ho, 92, as head of the Lotte Corp. pitting the two younger sons of Shin, both in their 60s, played out this summer in the familiar pattern – with one important difference.

Lotte is not really a Korean Company; it is Japanese.

So it is not surprising that the family came to a climax week at the offices of the Lotte Holding’s headquarters in Tokyo, this being the umbrella group of the $97 billion Lotte empire.

The struggle of brothers started when Shin’s older son Shin Dong-joo flew unexpectedly to Tokyo bent on dismissing the younger son, Shin Dong-bin (who is known in Japan as Akio Shigamitsu), and his closest aides.

The younger son fended off the attack at a board meeting, confirmed himself as CEO and Chairman and pushed the founding father upstairs to becoming the Honorary Chairman.

Lotte’s founder (known in Japan as Takeo Shigamitsu) was born in Korea during the Japanese colonial rule (1910-1945) but moved to Japan before the war’s end. After the surrender, he got his start in business by selling chewing gum on the streets of Tokyo.

In 1948 he founded the Lotte Confectionary Company to retail, gum, chocolates and other candy. The young Shigamitsu named his company Lotte from the character of Charlotte in the German novel Sorrows of Werther, which the founder admired.

He married a Japanese, and his two sons were born in Japan. Although they were raised as Japanese, they were actually Korean citizens under Japan’s strict immigration laws.

After Japan and South Korea normalized relations in 1965, Lotte began selling and investing in Korea. It now earns more from its Korean enterprises than those in Japan by a factor of more then ten.

In Seoul today the largest supermarkets and department stores are Lotte stores. Koreans buy their groceries, liquor and snacks by swiping a Lotte credit card. Many live in Lotte-built high-rise buildings and watch Lotte movies

Lotte owns professional baseball teams in Chiba, near Tokyo, and Busan in South Korea. In Japan and Korea, baseball teams, sporting the company name, are major public relations tools.

Aside from supermarkets and department stores, Lotte is building the Lotte Tower, which, when all 123 stories are completed by the end of next year, will be Korea’s highest super skyscraper and the sixth-tallest building in the world.

But these are difficult times for Lotte aside from the family squabble. It is a chaebol at time when chaebols are unpopular in Korea. It is a quasi Japanese company at a time when relations between the two countries are seriously strained.

Dismantling the chaebols  and breathing new life into the economy excessively dependent on the Hyundais and Samsungs has been a campaign issue in every recent presidential election including the 2012 contest won by Park Geun-hye.

However her credentials as a reformer of the chaebol is undermined by the fact that it was her father, the former dictator Park Chung-he, who literally invented them and made them the foundation for Korea’ remarkable economic engine.

Sensing that Lotte is vulnerable, some consumer activists are supporting a boycott of Lotte products to publicize how small businesses have been hurt by the large retail chains.

For all their trials, the scions of the other major Korean conglomerates have not had to defend their origins in a neighboring country or their considerable ties to Japan at time when relations are under serious strain.

Relations have been roiled by the continuing controversy over the “comfort women”, Koreans conscripted into Imperial Army brothels, and use of Korean forced labor during the war, among other irritants.

Lotte got in trouble with Koreans when it chose world-class Japanese figure skater Mao Asada as a major sponsor for Lotte products in both countries. It would have been wiser to have hired Korea’s much loved Olympic gold medal skater Kim Yuna, at least in Korea.

It was an example of how culturally tone deaf the Lotte management can be. As the feud spilled into the public domain, the competing brothers found themselves on television answering questions from Korean journalists in Japanese or heavily accented Korean.

Public opinion in Korea turned strongly against the conglomerate after the televised appearances of the battling brothers. “The negative image of the conglomerate is fast-spreading,” asserted the English-language Korea Herald.

Lotte’s management has taken some steps to assuage Korean public opinion, including erecting a gigantic South Korean flag on top of the Lotte super skyscraper in downtown Seoul.

It is also taking a closer look at its stock market shareholder structure, with the idea of reducing the number of Japanese shareholders.  Presently, the bulk of the shares are kept in the family.


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