Lotte family drama shifts to Japan as jailed CEO resigns

A sibling rivalry for control of South Korea’s largest retail-based conglomerate shifted to Japan, where jailed Lotte Group chairman Shin Dong-bin resigned as chief executive officer.The group’s Japan-based arm is important because it owns stakes including almost all of the group’s hotel unit and part of its listed chemicals business.The board of Lotte Holdings Co accepted the resignation “after cautiously reviewing the opinions of its compliance committee,” Seoul-based Lotte Corp said on Wednesday in an e-mailed statement. “Shin’s position has changed to director and vice chairman from CEO and vice chairman.”The resignation comes one week after a South Korean court sentenced the 63-year-old executive to 30 months in prison on a bribery conviction. His older brother, Shin Dong-joo, controls a third of voting rights in Lotte Holdings and has vowed to retake control of the entire group.To do so, Shin Dong-joo would have to turn board members against the leadership team assembled by Shin Dong-bin to run the group, something the older brother has failed to achieve in previous attempts at boardroom coups. The sibling rivalry spilled into public view three years ago.“Following the resignation of Shin Dong-bin, who has led the group, cooperation between units of Korea and Japan Lotte is expected to inevitably be weakened,” Lotte Corp said in the statement Wednesday.While jailed, Shin Dong-bin may still wield influence over the group as co-CEO Hwang Kag-gyu is leading an emergency management committee, while co-CEO of Lotte Holdings Takayuki Tsukuda has a track record of supporting Shin Dong-bin as leader of the group. Also, Shin Dong-bin has become the single largest shareholder of Lotte Corp after a restructuring helped consolidate his power.Shin Dong-joo, in a letter posted Wednesday on the web site of an organisation he runs, demanded that his younger brother also resign from Lotte Holdings’ board.“It is impermissible for him to stay on the board while he is unable to perform his duty as a board member as he is held in prison,” Shin Dong-joo said in the letter.Still, any renewed family feud may complicate the company’s moves towards a planned initial public offering for Lotte’s hotel unit, its hope of selling its network of stores in China and the completion of a restructuring plan.Shin Dong-bin had completed the first stage of a sweeping reorganisation last year that created a holding company for many of the groups’ assets and consolidated Shin’s control. The revamp is still underway with plans to list shares of Hotel Lotte and absorb it along with Lotte Chemical Corp into the holding company.Shin Dong-joo, 64, last week called for the “prompt resignation and dismissal” of his younger brother. In a statement posted on his Japan-based company’s website, the elder sibling also said “fundamental reforms in corporate governance are an indispensable and urgent topic for Lotte group.”