The dilemma of leadership

Lee Hyun-sang
The author is an editorial writer of the JoongAng Ilbo.

Kolon Group Chairman Lee Woong-yeul did something unusual and new when he announced he was abandoning all titles in the group. He bid farewell dressed like Steve Jobs, in a turtleneck and jeans.

In the Korean chaebol community, founding families unfailingly run their businesses across generations. But soon after his departure, authorities announced a probe into Lee on suspicion of tax evasion. Although the group claimed his quitting was irrelevant to the investigation, it was a disappointing development in what could have been a bold experiment in the chaebol world, whereby businesses would be left in the hands of professionals not family. Of course, the experiment may not have lasted at Kolon, as a son of the former owner is being groomed to run the enterprise.

Lee’s announcement to retire from management at the age of 61 nevertheless was refreshing. Family feuds and power struggles have characterized the chaebol community. The most high-profile case has been the feud among the sons of the Chung family of Hyundai Group in 2000. The Shin brothers of Lotte are still at war over the helm.

Chung Mong-koo, chairman of Hyundai Motor Group, which controls Hyundai Motor and Kia Motors — which together rank as the world’s fifth in shipments and sell 80 percent of the cars in Korea — has not been seen publicly for the last two years. His health issues concern the entire automobile industry, given his lofty contribution to and his role in the Korean car name.

The last time Chung was seen was during a parliamentary hearing over the Choi Soon-sil scandal, that resulted in the impeachment of President Park Geun-hye, on Dec. 16, 2016. He was carried to the hospital after he complained of dizziness during the questioning. Since then, there have been reports that he chaired meetings on business in China, but few have actually seen his face. Warren Buffett reported to shareholders of Berkshire Hathaway that Chung was diagnosed with early-stage prostate cancer. There have been muted rumors about the health of 80-something Chung.

Even if the group cannot go into details, it should tell shareholders how management decisions are being made.

Chung Eui-sun, his 48-year-old son and vice chairman of Hyundai Motor, faces a slew of challenges in overseeing the automaking conglomerate. He vowed to transform the group to a smart mobility solutions provider. A motor vehicle company has no future without incorporating new technologies like artificial intelligence and autonomous driving. But the outlook on Hyundai Motor is grim. It is not just the ongoing dismal performance, but its lack of future potential. It has made baby steps in electric cars, connectivity and autonomous technologies compared with its global rivals. It is competitive in hydrogen-fuelled vehicles, but cannot move forward due to poor recharging infrastructure. The company has spent over 12 trillion won ($10 billion) to buy an expensive lot in southern Seoul to build its new headquarters, but it has not been able to begin construction. Some sneer that the money could be better spent on building infrastructure for hydrogen fueling.

Hyundai Motor claims the elder Chung’s influence over management remains and that the young Chung stays respectful of his father’s authority. All of the elder Chung’s loyal subordinates have maintained their seats on the board. The reorganization plan to legitimize the succession also has hit a snag due to opposition from shareholders. All the developments suggest there is a limit to the younger Chung’s management push.

Hyundai Motor will be undertaking its year-end executive reshuffle soon. Some predict generational change, while others bet on the maintenance of the status quo. Hyundai Motor’s future is uncertain amid leadership questions. Lee, in his swan song, said he decided to leave after a thought hit upon him that he was the stumbling block to the group’s future. The others at Hyundai Motor’s management should give his words a thought.

JoongAng Ilbo, Dec. 7, Page 34