The unique shareholding structure of Lotte Holdings, the Tokyo-based firm that controls Lotte’s operations in Korea and Japan, may have been designed by Lotte Group founder Shin Kyuk-ho with the intention of bequeathing the retail giant to the son who gained more support from employees and executives of the company, Lotte officials in Seoul suggested Monday.

Family firm Kojunsha holds approximately one-third of stakes in Lotte Holdings, while the two separate groups of employees and executives of the firm take nearly 30 percent each. Meanwhile, Shin Dong-joo and Shin Dong-bin hold just 1.62 percent and 1.4 percent of stakes in Lotte Holdings, respectively.


This unusual shareholding structure may have led to the exhaustive battle between the two, said one official from Lotte Group. Neither of them is able to claim the throne decidedly, as they both hold tiny portions of the company, which explains why the battle is unlikely to end soon.

After failing to oust chairman Shin Dong-bin at the third consecutive shareholders meeting on Saturday, Shin Dong-joo seemed unfazed, promising to continue holding shareholders meetings until he regains power.

“I will fight to remove chairman Shin Dong-bin and CEO Takayuki Tsukuda from Lotte Holdings and to normalize operations of Lotte Group,” Shin Dong-joo told reporters after the meeting.

Lotte Group responded through a statement that Shin Dong-joo’s continued challenges were “repetitive” and that his actions were “interfering with operations and hurting the company’s value.”

In order to control Lotte Group, Shin Dong-bin and his brother Shin Dong-joo must secure the support of at least two of the three major shareholders -- Kojunsha, the employees and executives.

By placing the choice of leadership in the hands of the executives and employees associations, founder Shin seems to have intended for the brothers to actively prove their leadership merit to the relevant stakeholders in order to earn power.

In particular, the employees association serves as a major swing vote, meaning that either brother can attempt to regain control of the company through a shareholders’ vote even after being ousted.

The current situation is unique to Lotte, as other conglomerates such as Samsung usually prepare to give successors complete power through large controlling shares.

It is still unclear how Shin Dong-joo’s challenges against Shin Dong-bin’s chairmanship and Korean prosecutors’ current investigation into Lotte Group on allegations of embezzlement and slush funds will affect each other.

Chairman Shin Dong-bin is expected to return to Korea from Japan this week. He is likely to face an overseas travel ban until the investigation is complete, according to sources. That would prevent Shin Dong-bin from attending any additional shareholders’ meetings called by Shin Dong-joo in Tokyo, they added.

By Won Ho-jung (hjwon@heraldcorp.com)