[People人] Decisive Victory in 1st Round of Management Dispute... "Now Time to Show Our Ability to Overcome COVID-19"

Sudden Passing of Father... Worsening Korea-Japan Relations, COVID-19, and Management Disputes
Gaining Public Support through Skinship and Performance, First Round Victory
Long-Term Battle Inevitable... Must Demonstrate Ability Amid COVID-19 Crisis

[Asia Economy Reporter Yoo Je-hoon] The past year brought unprecedented internal and external crises to him, unlike anything the Korean Peninsula has experienced before. After his father unexpectedly passed away, he succeeded to the position of chairman, but his elder sister, who raised the "ban-gi" (half-year), joined forces with external third parties to attempt to seize management control.

Meanwhile, the external business environment also deteriorated. The boycott of travel to Japan due to the Korea-Japan dispute caused profitability to plummet, and from early this year, the COVID-19 pandemic caused 80-90% of work to disappear. All of these were experiences of Cho Won-tae (45, photo), chairman of Hanjin Group, over the past year.

Corporate circles are focusing on Chairman Cho's moves after his victory in the management rights dispute of Hanjin Group. Amid an inevitable long-term battle with the shareholder coalition (known as the "3-party alliance") for the normalization of Hanjin Group, Chairman Cho faces the challenge of proving his management capabilities during the COVID-19 crisis to turn employees and shareholders into allies.

◆ Sudden Succession Amid Multiple Adversities = Chairman Cho ascended to the helm of Hanjin Group about two weeks after the death of his father, the late Cho Yang-ho, on April 8, 2019, specifically on April 24 last year. Due to the sudden absence of the top executive, Hanjin Group urgently needed to stabilize management and quickly establish a third-generation leadership.

Born in 1975 as the eldest son of the late Cho Yang-ho, Chairman Cho began his management training in 2003 by joining Hanjin Information & Communications, an IT affiliate of Hanjin Group. In October 2004, he moved to Korean Air, where he worked in essential departments for airline management, including the management planning team, procurement department, passenger business division, management strategy division, and cargo business division.

He was promoted to executive vice president overseeing management strategy and sales in 2014 and became CEO of Korean Air in 2017. In the aviation industry, this is considered an "elite course."

However, right after Chairman Cho's inauguration, Hanjin Group was swept into turmoil. In July of that year, the boycott of travel to Japan due to Korea-Japan tensions caused a sharp decline in profitability across the airline industry. The oversupply in the Japan air route spread to the Chinese and Southeast Asian markets. From early this year, COVID-19 began to threaten the industry. Currently, about 100 of Korean Air's 145 passenger aircraft are parked at airport aprons, and passenger flight operations have decreased by more than 80-90%, putting the company in crisis.

What troubled Chairman Cho the most was the attempt by the 3-party alliance, led by his sister, former Korean Air Vice President Cho Hyun-ah, to seize management control. Although their mother, Lee Myung-hee, an advisor at Jungseok Enterprise, and younger sister Cho Hyun-min, executive director of Hanjin KAL, supported them, the shareholding gap between the two sides once narrowed to about 1 percentage point, pushing Hanjin Group into crisis.

◆ Building Support Through Engagement and Profitability... Winning the First Battle with Public Opinion = Amid this, Chairman Cho chose to engage closely with employees. Right after his inauguration last year, he introduced employee-friendly work policies such as relaxed dress codes and flexible lunch hours, receiving favorable reviews.

The most symbolic event was when Chairman Cho boarded a charter flight to Wuhan, China, to evacuate Korean nationals trapped there. At the departure hall of Incheon International Airport's Terminal 2, he said, "Employees volunteered to go despite the risks; I could not just sit in the office," and explained, "Although I cannot do much, I must do what I can on site."

Afterward, employee sentiment began to shift toward Chairman Cho. Labor unions of three group affiliates declared support for his leadership, and public opinion, which had been cold due to incidents like the "nut rage incident" (Korean Air KE086 flight delay) and the "water cup abuse incident," began to turn around.

The good performance amid a worsening business environment also played a role. Despite all Korean airlines posting losses due to the boycott of travel to Japan last year, Korean Air was the only one to record a profit of about 250 billion KRW (consolidated basis), earning praise for its resilience. This influenced proxy advisory firms such as ISS and the Korea Corporate Governance Service (KCGS) to recommend support for Chairman Cho's reappointment, as well as the National Pension Service, which holds a 2.9% stake in Hanjin KAL, to vote in favor of his reappointment, according to industry evaluations.

As a result, Chairman Cho was successfully reappointed as an inside director at the Hanjin KAL annual general meeting held on the 27th of last month. All candidates recommended by the Hanjin KAL board were appointed, while candidates recommended by the 3-party alliance, including former Vice President Cho, failed to clear the hurdle.

Regarding the public support that helped his reappointment, Chairman Cho said, "This general meeting was held with more public interest than ever before," and added, "Once the business environment normalizes after COVID-19, I will dedicate myself even more to the country and its people based on a sense of duty as a key national industry."

◆ Prolonged Dispute and COVID-19... "Prove Management Capability" = However, inside and outside the business community, there is an assessment that "the real game starts now." The 3-party alliance announced on the 1st that they have increased their stake in Hanjin KAL to 42.74%. Although they suffered a "complete defeat" in the first battle, they clearly expressed their intention not to give up the second battle, which will take place through extraordinary or next year's regular general meetings.

For Chairman Cho, the situation is urgent. Delta Air Lines, his biggest ally, is unlikely to continue playing the role of a white knight due to the worsening business environment caused by COVID-19. He must find another white knight or devise a clever strategy.

Accordingly, industry insiders argue that Chairman Cho must demonstrate solid management capabilities during this emergency caused by COVID-19 to block the legitimacy of the management rights dispute. An industry official said, "When the National Pension Service decided on its voting policy regarding Hanjin KAL shares, it was influenced by the fact that Korean Air under Chairman Cho was the only Korean airline to record a profit last year," adding, "Going forward, institutional investors' investment sentiment will depend on what capabilities Chairman Cho shows."

Korean Air under Chairman Cho's leadership has also begun preparing a full-scale self-help plan. It is currently pushing for the sale of idle assets such as the Songhyeon-dong site in Jongno-gu, and a review of low-profit businesses such as the hotel business is expected soon. Additionally, considering that the aviation industry's slump due to COVID-19 may continue until at least the end of the year, various personnel adjustment plans are also under review.

Chairman Cho stated, "To overcome the wave of crisis caused by COVID-19, I plan to concentrate all capabilities with all employees. We will also carry out painful self-help efforts," and added, "Considering that the crisis triggered by COVID-19 is difficult to overcome by the efforts of a single company or industry alone, I earnestly hope for active government support beyond the company's self-help efforts."

This content was produced with the assistance of AI translation services.