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Anti-Lotte sentiment rising in S. Korea

August 4, 2015

Lotte Corp. CEO Noh Byung-yong, center in front row, and 36 other CEOs of Lotte Group affiliates hold a press briefing after a meeting at the Lotte World Tower in southern Seoul, Tuesday. (Yonhap)

Consumer groups plan to launch boycott campaign

By Lee Hyo-sik

The escalating family mudslinging at Lotte Group is triggering a public uproar as consumers are exasperated by the “foul infighting” over control of the country’s fifth-largest conglomerate.

Lotte Group’s opaque corporate governance structure and its founder Shin Kyuk-ho’s emperor-like management style have aggravated the public sentiment toward the business empire.

In addition, the group’s ownership structure ― in which a holding firm based in Japan controls all of its Korean units ― has made things go from bad to worse as anti-Japanese sentiment runs high here ahead of the 70th anniversary of the nation’s liberation from colonial rule on Aug. 15.

Consumer groups have begun launching a boycott campaign against Lotte, while investors have shunned buying shares of group units listed on the local bourse.

The National Tax Service is also conducting an audit of Daehong Communications, a public relations unit of the Lotte Group.

Several civic groups are also demanding that the tax agency and the Fair Trade Commission thoroughly inspect the group for possible tax evasion and irregular business practices.

The Financial Consumer Agency (FCA), one of Korea’s largest consumer advocacy groups, said Tuesday that it will stage an all-out boycott of all Lotte Group affiliates. Other consumer groups are expected to follow suit as the ongoing Lotte family row will likely drag on for quite some time.

The boycott is expected to hit the retail and manufacturing units of Lotte Group.

“The recent family feud at Lotte Group shows that family controlled conglomerates have no interest in fulfilling their corporate social responsibility,” the FCA said. “We will stage a nationwide boycott of Lotte Card, Lotte Nonlife Insurance, Lotte Department Store and other group affiliates.”

The agency urged consumers not to buy products sold or made by Lotte companies, stressing that law enforcement authorities should investigate the group to check if it has committed any illicit acts.

“Korea needs to drastically reform chaebol families because they are at the root of the country’s increasing economic inequality and degrade the national image,” it said. “Their dubious corporate governance structure and emperor-like management styles cannot be tolerated anymore.”

Units back Dong-bin

On Tuesday, the heads of 37 Lotte Group affiliates here issued a joint statement, pledging to support Shin Dong-bin, the youngest son of the Lotte Group founder, as the next group leader, over his elder brother Dong-joo.

The CEOs held a meeting at the Lotte World Tower in southern Seoul and issued the statement, urging Kyuk-ho to name Dong-bin as his successor. They also didn’t forget to express respect for the group founder, who transformed a small chewing gum maker into what Lotte Group is today.

“Lotte Group is a Korean company which has been growing together with the country over the years,” the statement read. “Lotte is owned not only by the founding family, but also by employees, shareholders and customers. We will make every effort to resolve the problems as quickly as possible.”

Dong-bin who holds the titles of Lotte Holdings Japan CEO and Lotte Group chairman in Korea, did not take part in the meeting. Instead, he visited the group’s training center in Osan, Gyeonggi Province, and had lunch with new recruits. He also visited the group’s logistics center nearby.

Officials of Lotte Group’s retail units expressed concerns that anti-Lotte sentiment is growing rapidly among consumers.

“We are concerned that the boycott may lead to a drop in sales,” a Lotte official said, declining to be named. “Before things get any worse, we really hope that the ongoing management dispute comes to an end as quickly as possible.”

Executives of other conglomerates also expressed concerns about the fallout from the Lotte feud, saying things could get out of hand if the Lotte family infighting continues to gain steam.

“I really think that Lotte founding family members must put their house in order as soon as possible,” an executive of a business association said.

“The ongoing infighting has damaged the group’s reputation and hurt its brand image among consumers,” he said. “If the conflict is prolonged, Lotte will begin feeling the pinch because more consumers and business partners will keep away from it.”