Lotte boss faces daunting challenge

Lotte Group Chairman Shin Dong-bin is facing his biggest challenge since he took office in 2011.

The group’s key affiliates have been involved in a series of scandals, and this is dampening his drive to expand the group’s business scope.

Also at risk are his efforts to solidify his position within the group after he succeeded his father and Lotte founder Shin Kyuk-ho.

On April, 8, Shin participated in the opening ceremony for a beer factory in Chungju, North Chungcheong Province. This was a meaningful moment for the chairman and the group, but the celebratory event was kept low-key.

That was because a worker was killed earlier that day during construction of the second Lotte World Tower in Jamsil, Seoul, one of the core projects the group has focused on.

The accident has increased the number of casualties at the construction site to eight, including two deaths, and raised concerns over safety breaches.

The company originally planned to partly open the complex, which will house an amusement park, a hotel and a department store within a 555-meter-tall building, in May but this could be delayed.

The incident at the construction site was not the only misfortune the group has faced in recent months.

The group’s affiliate Lotte Card was found to be involved in a massive consumer data leak case along with two other credit card firms ― KB Kookmin Card and NH Nonghyup Card ― in January, which damaged the firm’s credibility.

It is estimated that the largest-ever data theft affected about 20 million people, and the three card firms were banned from signing up new customers or issuing loans for three months from Feb. 14.

After this scandal, Lotte Card named Chae Jyung-byung as its new CEO, replacing Park Sang-hoon, who expressed his intention to take full responsibility and step down from the post.

Market insiders believe the incident could have a negative impact on the group’s efforts to expand its business scope in the financial sector by acquiring LIG Insurance. The labor union of LIG has already expressed opposition to Lotte’s takeover bid.

Lotte joined the race along with financial firms KB Financial Group and Tongyang Life Insurance to buy the non-life insurer by submitting a preliminary bid last month.

Another scandal that hit the group hard is the massive corruption at Lotte Homeshopping, a sister firm of Lotte Shopping.

Lotte Shopping CEO Shin Heon is now suspected of receiving kickbacks from subcontractors with executives from Lotte Homeshopping already indicted on similar charges. Shin is expected to soon be summoned for questioning over the allegations.

Despite a series of incidents at the group, He seems to have a sense of urgency to cope with them; but it remains to be seen how the chairman of the nation’s fifth-largest conglomerate will clean up the mess and regain the trust of customers.

It was reported that Shin angrily said the kickback scandal “should have never taken place,” when he ordered an audit of all affiliates on April 7.

As part of efforts to cope with the situation after the series of incidents, he also suggested strengthening inside monitoring to prevent corrupt practices.

“After a series of disgraceful incidents with the group, the chairman called heads of affiliates into the office and admonished them, demanding they come up with measures to prevent such events from reoccurring,” an official from the group said. By Kim Tae-jong The korea times