Deputy Prime Minister and Finance Minister Choi Kyung-hwan on Thursday said he would look into the cash flow and governance structure of the family feud-stricken Lotte Group.
“The government is keeping a close watch on the issue. If necessary, state institutions will dig into the shady governance and the cash flow of the company,” Choi told the media.
“I am very disappointed that (the management of) the country’s fifth-largest business conglomerate is stuck in an irrational and unfathomable fight over the managerial rights. Lotte Group should instead improve its governance structure. Otherwise, it will face the music in the market,” he said.
Choi was referring to the latest scandal involving the two sons of Lotte founder and general chairman Shin Kyuk-ho, as they battle for the helm of the 90 trillion won ($77 billion) business group, which has involved bickering, backstabbing and more.
Public criticism has emerged over whether the founder, who reportedly owns just 0.05 percent stake in the company, has the rights to discern the future manager of the company and damage the company value. Lotte reportedly has cyclical shareholding structure of 416 links to ensure the founding Shin clan controls over 74 Korean affiliates of Lotte in Korea.
But Choi said that the government is not considering revising a law to dissolve governance of conglomerates, including Lotte. “It is up to the companies to improve themselves,” he said.
The Fair Trade Commission, the Financial Supervisory Service and the National Tax Service have launched investigations into Lotte’s governance. The FTC and the ruling Saenuri Party agreed on the day to push for a law revision allowing the authorities to monitor overseas affiliates of domestic conglomerates to prevent the creation of an excessive cyclical shareholding structure abroad.