One scandal too many

Home > Opinion > Columns

print dictionary print

One scandal too many


Yi Jung-jae
The author is a columnist of the JoongAng Ilbo.

Cho Hyun-ah, infamous for her “nut rage” that cost her an executive title at Korean Air Lines and who damaged the reputation of the country’s flag carrier, has challenged younger brother Cho Won-tae, now leader of the transportation-heavy Hanjin Group after the death of their father. She may have her reasons to publicly declare a war with her own brother and cause more disturbance for employees and stock investors, but we are not interested.

Behind the legal formalities, Cho Hyun-ah more or less lambasted at her brother for going his way with the family business and demanded her share. Stakeholders –— employees, investors and partner suppliers — should be confounded by the renewed owner risk and management uncertainties from a sibling feud. Since the person who is the legal chair refuses to comply with the demands of his sister, the power struggle is expected to run for some time.

The repeat of a power struggle would stir more negative sentiment toward family-run corporate empires at a time when corporate investment is in the dumps and the Korean market rapidly losing appeal to foreign capital. Fight over inheritance can take place in any family. But the Cho family and Hanjin Group cannot afford more scandals. The family members have caused one uproar after another throughout last year until the sudden death of the patriarch.

The heiress ordered the return to the gate of a flight from New York City because she was not happy with the way her macadamia nuts were served. Younger sister Cho Hyun-min, then-marketing executive of the airline, came under fire and was investigated for throwing a glass of water toward an ad agency executive during a marketing meeting.

There is a term in psychology dubbed the affect heuristic, which is a type of mental shortcut in which people make up their minds from recent emotions and experiences. An airplane crisis is regarded more dangerous than a car accident because of the higher casualty ratio. Such an accident stings in one’s memory. The disgust and shame over the nut and cup frenzy are still vivid in the public memory. They automatically respond to the new scandal from the Cho family with loathing. They may say “KAL again? The chaebol are the same.” It has given people another good reason to hate the chaebol and back the government’s anti-big-chaebol policy.


Cho Hyun-ah, left, infamous for the “nut rage” that cost her an executive title at Korean Air Lines and who damaged the reputation of the country’s flag carrier, has challenged Cho Won-tae, her younger brother, right, who became the leader of the transportation-heavy Hanjin Group after the death of their father. [JOONGANG ILBO]

Moreover, the family troubles only added to the woes of the aviation industry. Kumho Group is handing over its controlling stake in Asiana Airlines, the second-largest full-service carrier, to the HDC Hyundai Development-led consortium. Jeju Air under the ownership of Aekyung Group is taking over Eastar Jet, the No. 5 budget carrier. Two new low-cost carriers are readying to join the already-heavily-congested market. The owner risk will further threaten Korean Air’s status as the flag carrier. Its 20,000-strong staff and customers are in a state of anxiety.

Korean Air Lines has been faring poorly. Its operating profit for the third quarter slumped 76 percent on year to 96.5 billion won ($83 million). It forced unpaid leave for the first time ever in October and also invited early retirement for the first time in six years. Prospects for next year are equally murky.

The troubles at family-run enterprises could also justify institutional meddling. The liberal government disapproves of chaebol for overbearing control through small stakes and hereditary succession. It has been encouraging the National Pension Service (NPS) to be more active in the affairs of large companies in which it has large ownership stakes. The holding entity over Korean Air was the first target of stewardship intervention by the pension fund. There was speculation in the stock market that the government was out to nationalize the flag carrier and that Cho had died so suddenly due to anxiety. The sibling feud would invite back state intervention.

Their fight will only benefit hedge funds and rival peers. The family name will be shamed for good. Their father died so suddenly in April that he did not even leave a will.

His death came after Cho was pushed out as the board chair because of the opposition from the NPS. He had lost his title in his business because of the scandal cause by his daughters. The renewed scandal is another disgrace to their deceased father.

The aviation industry is a state-supervised business. Foreigners cannot be included in the management. The industry must serve the national economy.

If personal greed guides them, the Chos have no right in the business. They must seriously ask themselves if the fight is worth it for their sake, their father’s sake and the company’s sake.

JoongAng Ilbo, Dec. 27, Page 34
Log in to Twitter or Facebook account to connect
with the Korea JoongAng Daily
help-image Social comment?
lock icon

To write comments, please log in to one of the accounts.

Standards Board Policy (0/250자)