SK’s biz plans derailed by chairman’s jailing

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SK’s biz plans derailed by chairman’s jailing

With its chairman in jail, SK Group has lost its main compass and may get lost trying to navigate its way through tough global competition.

The nation’s third largest conglomerate is at risk of losing future growth engines that Chairman Chey Tae-won has been spearheading, according to analysts and even the company itself.

Chey was sentenced to four years in jail on Thursday for embezzling 49.7 billion won ($45.6 million) from corporate coffers.

It was the second time the 52-year-old group chief was jailed. He did three months in 2008 after being convicted of insider trading and accounting fraud.

The group now has to cancel appointments Chey made with foreign business figures that were arranged to take place this year.

Chey’s plan to expand the oil and IT businesses of the group is likely to suffer a setback.

This month, he was planning to visit Thailand, Malaysia and Singapore to meet with business moguls to discuss cooperation. One of them is PTT Group, the largest energy group in Thailand.

Chey had a grand plan to build an oil storage warehouse and other infrastructure for the chemical business in the region.

Chey met with PTT Group CEO Palin Chuchottaw last year and promised to meet again this year.

“It will be difficult for the chairman to keep his physical contacts with foreign business partners,” said a spokesman for the group. “We will continue doing overseas businesses as best we can while the chairman is absent.”

Chey also wanted to pave the way for the group’s IT units - SK Telecom, SK C&C and SK Broadband - to advance into Southeast Asia. The telecom unit is currently bidding for a license in Myanmar.

The jailed chairman was also planning to fly to Latin America this month.

In order to enhance the group’s resources development business, Chey was going to make contact with political and business figures in Brazil and Peru. Resources development is one of the group’s future growth engines. SK Innovation is currently exploring 29 oil and gas fields around the world.

In Turkey, SK has been in talks with officials to build a thermal power plant and a tunnel, and establish electronic commerce.

The group says Chey’s absence won’t have much impact on its domestic businesses.

SK has been trying to reduce its reliance on the chairman by revamping its group structure. From January, Kim Chang-geun, CEO of SK Chemicals, has begun taking some of Chey’s responsibilities as he was appointed chair of Supex, the group’s top decision-making body.

All 18 subsidiaries of SK Group are now able to make their own decisions without intervention by the group chairman.

Nonetheless, the group’s plan to take over STX Pan Ocean was scrapped the day Chey was put behind bars.

“It seems like SK has given up its bid for the STX unit because of the chairman’s imprisonment,” said an analyst at a foreign investment bank.

Reportedly, SK Shipping had been working with Morgan Stanley and Standard Chartered to buy the shipping unit of STX for a few months.

According to a spokesman at the group, the shipping unit has confirmed it has officially halted the acquisition process.

The latest imprisonment is also likely to dent Chey’s image as a businessman who cares about society. He has worked hard on numerous community-service initiatives.

Lately, Chey was promoting the role of so-called “social enterprises” to the global business community at international forums, including the World Economic Forum in Davos, Switzerland. According to Chey, a social enterprise aims to serve the public interest by helping employ minority groups such as immigrants, people with physical disabilities and the elderly. It creates strategies to return profits to society through various projects and channels.

SK Group launched the country’s biggest social enterprise, dubbed SK Happy Narae, last year.


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

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