The death of Lotte’s founder ends an era for South Korea’s chaebol

BLACK LIMOUSINES with tinted windows blocked the street outside the funeral hall of the Asan medical centre in Seoul on January 21st. Endless rows of bouquets filled the corridors, with notes of condolence signed by the great and the good of South Korean business and politics. Journalists jostled to catch a glimpse of prominent mourners in dark suits filing through the parlour to deposit a single white flower each on the coffin inside.

They were paying their respects to Shin Kyuk-ho, the founder of Lotte, South Korea’s fifth-largest chaebol (as its family-run conglomerates are known). Many may have felt that they were marking the end of an era. Mr Shin, who had died two days earlier aged 98, was the last of the major chaebol founders.

His rise, like that of his peers at Samsung or Hyundai, was inextricably linked with the country’s journey from war-torn devastation to industrial prowess. Born in a village on the Korean peninsula’s south-eastern coast, Mr Shin did not plan to go into business. When he stowed away on a ship to Japan as a young man, his ambition was to become a novelist in Tokyo. Because he had more success selling chewing-gum, the only public reminder of his literary aspirations is the company name. Lotte was the heroine in Johann Wolfgang Goethe’s “Sorrows of Young Werther”.

Mr Shin grew his chewing-gum company into a Japanese-Korean leisure empire with an estimated $85bn in annual revenues, best known for its hotels and duty-free shops. Its rarefied moniker has not saved Lotte’s business from the same prosaic problems as other chaebol. Like many family-run groups, Mr Shin’s has faced allegations of corruption. He and Shin Dong-bin, his younger son, were sentenced to prison for embezzlement and other charges in 2018. (Shin père was never jailed; Shin fils, who was imprisoned briefly during the investigation, continues to run the company while serving a suspended sentence.) And the elder Mr Shin failed to establish either of his sons as a clear successor, which led to a protracted fight for control between the two.

This looked settled when Shin Dong-bin ousted his father and older brother in a boardroom coup in 2015. But founders’ deaths can reignite filial power struggles, as happened at Hanjin Group (which owns Korean Air) when its founder died last year. Because Mr Shin left no will it is unclear who will inherit his stake in Lotte’s holding company and various affiliates. The younger son has fended off several attempts by his aggrieved sibling to regain control. He may need to limber up for another.