SK shuffles executives at 4 main subsidiaries

SK Group, the third-largest conglomerate in Korea, announced a reshuffle of key executives Tuesday while Chairman Chey Tae-won remains behind bars for using the company’s funds in risky investments.

It was the first time the conglomerate replaced the top management of its four subsidiaries at once.

SK Group said it held a board meeting Tuesday morning to confirm the new chief executive officers at four major subsidiaries: SK Telecom, SK Innovation, SK Networks and SK C&C.

The generational shift took place in SK’s core business areas of mobile communications, energy and chemicals at a time of falling revenues.

Only SK Hynix, its cash-cow semiconductor unit, was exempt from the leadership change.

Chang Dong-hyun, chief operation officer of SK Planet, will be taking the top position at SK Telecom.

Chung Chul-khil, CEO of SK C&C, will now head SK Innovation; Moon Jong-hoon, chief of SK Supex Promotion Council, was named SK Networks CEO; and Park Jung-ho, vice president of SK C&C, was promoted to CEO of SK C&C.

SK Supex Council, the conglomerate’s top decision-making body, prepared for the 2015 restructuring at a CEO seminar in October, according to SK Group.

Chairman Chey has been absent since January 2013, when he was detained for embezzling corporate funds for a bad investment. In March 2014, the Supreme Court sentenced the chairman to four years in prison.

It led to the longest management vacancy since the conglomerate was founded. The absence of the chairman is the biggest worry for investors.

“As the business environment deteriorates and the management vacancy is prolonged, a renewal of leadership was desperately needed,” said Kim Chang-geun, chairman of the Supex Council.

The operating profit of SK Telecom has declined more than 10 percent year-on-year from 1.5 trillion won ($1.3 billion) to 1.34 trillion won ($1.2 billion) as of the third quarter.

Future growth is dicey as the smartphone market is now saturated and there is little room for expansion.

SK Innovation is in an even worse situation, with its operating profit plunging 83.2 percent year-on-year from 1.4 trillion won to 238.9 billion won in the third quarter as crude prices fell. The situation isn’t expected to turn around anytime soon as OPEC members led by Saudi Arabia have decided to keep up the supply of crude.

“If SK Innovation executes a restructuring, it is likely that it will eliminate new businesses that are having difficulties making profits rather than the flagship business of oil refining,” said an industry observer.

There is also a major generational shift in top management. SK Group hopes that a younger top management will bring new energy to the organization.

Meanwhile, the core of the SK Supex Council has received a vote of confidence from the chairman.

Supex Council Chairman Kim will remain in his position and Ha Sung-min, the former CEO and president of SK Telecom, will help him as the ethics chair.

BY kim jung-yoon [kjy@joongang.co.kr]