SK touts its power devolution 3.0

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SK touts its power devolution 3.0

'그룹에 묻지 마라' SK 최태원 회장의 도전


SK Group, Korea’s third-largest family-owned conglomerate, is attempting to devolve power from its group chairman to its subsidiaries’ CEOs.

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Earlier this week, about 40 executives of the group, including Chairman Chey Tae-won, gathered at a confidential, two-day seminar to mull over changes to its corporate governance at a hotel in Seoul.

After the seminar, the group announced a master plan dubbed “Separately but Together 3.0,” which outlined a governance structure that grants subsidiaries greater rights to make decisions.

The new plan will be executed from Jan. 1 next year.

One of the issues in the current presidential campaign is the governing structures of the chaebol and how they need to be changed to increase “economic democracy” in the country.

The essence of the new plan is, “Don’t ask the group. Be independent, make a judgment, execute the plan and take responsibility,” the group said in a statement.

In fact, SK has been using the slogan “Separately but Together” since 2002 to emphasize that subsidiaries have autonomy.

“When subsidiaries have their own problems or matters that require careful decision-making, often they are late in acting because they wait to see what the group says,” said an SK official who asked for anonymity. “There are some units that missed opportune moments to make investments due to a delay in group-level decisions.”

Chief executive officers of SK subsidiaries will be granted enhanced control of their companies. A new board of the CEOs will be formed and given powers to oversee important businesses of each subsidiary. The board will discuss projects that might affect the group’s business portfolio and profitability.

Some business analysts say SK also wants to distance the company from the owner at the helm of the group.

Chey is on trial for allegedly embezzling 180 billion won ($165 million) from the corporate coffers.

In August, Kim Seung-youn, chairman of Hanwha Group, the country’s 10th-largest conglomerate, was jailed for embezzlement and breach of trust, setting off alarm among conglomerates and raising the possibility that SK’s Chey might also be imprisoned.

Analysts were skeptical about SK’s plans.

“It won’t be easy to break the mold of the current system in which group owners wield absolute power across their units,” said an analyst at a local securities firm.

It is the third time SK made changes to its governance structure.

In 2007, the group launched a holding company named SK Holdings that is similar to the Future Strategy Office of Samsung Group. The holding company has served as a “control tower” for the entire group.

“Creation of a holding company makes it easier for the owner to simplify the structure and alignment of the group and to dominate the subsidiaries,” said Park Sang-in, a professor at Seoul National University.

According to the Financial Supervisory Service, Chey and his family members own a 48.5 percent stake in SK C&C and the IT solutions provider holds a 31.8 percent stake in SK Holdings. The holding company then has stakes in SK Telecom, SK Innovation, SKC and SK Networks.

“Even though the group said it will increase the autonomy of its subsidiaries, its real intention is doubtful,” Park said. “There are many loopholes in the current holding system of SK Group through which the chief can maintain his imperial-style management.”

Park said SK C&C is the company with effective power across all units.

From 1998 to 2002, all power was centered in the chairman’s office. Chey restructured the group between 2002 and 2007 by empowering the board of directors and outside executives. That was SK’s first move toward decentralization.

“If the owner-centered structure proved effective to do domestic business, a decentralized structure would help each unit operate in overseas markets through a faster decision-making system,” said Cho Byung-koo, an overseas PR employee at the group.

By Song Su-hyun [ssh@joongang.co.kr]

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