No loyalty at Lotte

Back in July, when two brothers waged a ferocious war for control over the Lotte Group - each claiming to be the rightful heir of their father, Lotte founder Shin Kyuk-ho - a president of a Lotte company in Korea had to go into hiding. He turned off his cellphone and laid low. It was the only way to avoid an awkward situation. Not long before, he and other presidents of Lotte units were rounded up by an aide to the eldest son Shin Dong-joo and asked to choose sides in the feud between Dong-joo and his younger brother Shin Dong-bin. He had no intention of being swept up in the family feud. He lamented that his 30 years of commitment to the company could be completely forfeited if he was commanded to choose between the two sons of the founder - and he chose the ultimate loser in the battle.

The fratricidal feud at the retail and hotel behemoth did little credit to anyone involved throughout the summer. It played out like a never-ending soap opera. We thought we would hear the end of the story when the younger son took full control of Lotte Group in Korea. But the vanquished older brother came back. He is now residing in Seoul and has organized a public relations team that includes a former head of a state bank to appeal to the Korean public. His belief is that his younger brother was generally favored by the public over the summer because he could speak much better Korean and didn’t come across as Japanese.

The 34th floor of the Lotte Hotel in downtown Seoul is the latest stage for the sibling contest to win the father’s favor. It was the ailing founder Shin’s office and residence in Korea. Both brothers have stationed secretariats there to serve their father, who maintains the honorary chairman title. Two teams of secretaries are at work on the same floor. The eldest son accompanied his 92-year-old father to a hospital to prove that he was still quite able. But the elder Shin refused the medical checkup, saying he was afraid of shots.

The fight between the two brothers has not only smeared the Lotte corporate name but is threatening the livelihoods of thousands of Lotte staff. Because of the horrendous publicity, Lotte is on the verge of losing its long-held license in the duty-free business in Seoul. Lotte, which runs two duty-free shops in Seoul, has to renew its license every five years. Duty-free shop employees cannot sleep at night worrying that they could lose their jobs.

The Lotte name has been synonymous with Korean duty-free shops, but the government is now contemplating whether to renew its business license or yank it. If the license is canceled, hundreds or thousands of workers at Lotte Duty Free Shops could be out of work. Lotte Duty Free has a staff of 273, but when including part-time salespeople, the number reaches over 3,400. After Lotte lost a license at Gimhae Airport, 390 staff lost their jobs and 250 are still out of work. Any company that wins a new license does not have to take over the workers form the existing duty-free shop. Most would lose their jobs.

The Lotte clan should explain what they are fighting about and why it’s worth their employees’ jobs. Regardless of who wins at the end of the day, the new chairman won’t have any respect left from the Korean people. The Shin scions must look after their thousands of employees. Akio Toyoda, the grandson of Toyota’s founder and the chief of one of the world’s biggest carmaker, was in tears when he faced staff in the U.S. after he was chastised at a U.S. congressional hearing for brake defects on its hybrid Prius car in 2010. He remarked that he thought he had to protect his customers and dealers, but realized that it was them that had been protecting him.

JoongAng Ilbo, Nov. 3, Page B8

The author is the industry news editor of the JoongAng Ilbo.

by Pyo Jae-yong