Chairman Cho Yang-rae of Hankook Tire Transfers Shares to Younger Son... Management Dispute Sparks Remain

[Asia Economy Reporter Su-yeon Woo] Cho Yang-rae, chairman of Korea Technology Group, has expressed his intention to transfer management rights by handing over all the shares held by the group to his second son, Cho Hyun-beom, president of Korea Technology Group. This share sale marks the official start of the third-generation management succession process, while also raising the possibility of a management rights dispute between the eldest son, Cho Hyun-sik, vice chairman of Korea Technology Group, and the second son, President Cho.

According to industry sources on the 29th, Chairman Cho recently sold all 23.59% of the shares he held in Korea Technology Group to his second son, President Cho, through a block deal (large-scale trading outside regular hours). Combining the shares he already held with his father's shares, President Cho now owns 42.9%, becoming the largest shareholder.

The previous difference in shareholding between eldest son Vice Chairman Cho and second son President Cho was only 0.01 percentage points. With Chairman Cho's recent share sale, President Cho's shareholding rose to 42.9%, widening the gap between the two to 23.58 percentage points.

When President Cho resigned as CEO of Hankook Tire & Technology on the 23rd ahead of his second trial on embezzlement charges, there was speculation that the management succession power might shift to eldest son Vice Chairman Cho. However, Chairman Cho's share sale is interpreted as a clear intention to transfer management rights to his second son and to reduce the potential for disputes.

Eldest son of Cho Yang-rae, Chairman of Hankook Technology Group, Vice Chairman Cho Hyun-sik (left in the photo) and second son, President Cho Hyun-beom

Although the father has supported the second son, the spark for future management disputes remains. Combining Vice Chairman Cho's 19.32% shareholding, the 10.82% held by Chairman Cho's eldest daughter Cho Hee-won, and the 7.74% held by the National Pension Service, the total reaches 37.88%. Including minority shareholders, there remains a possibility of securing more than half of the shares.

The outcome of President Cho's trial will also be an important variable in the management rights issue. According to the revised Enforcement Decree of the Act on the Aggravated Punishment of Specific Economic Crimes, executives who have committed embezzlement or breach of trust involving 500 million KRW or more cannot return to the company. Depending on the sentencing, the position of the National Pension Service, which will play a casting vote role, is also expected to be clarified.

President Cho, who was indicted on charges of breach of trust, acceptance of bribes, and embezzlement in the course of duty, was sentenced in the first trial on April 1 to three years in prison, four years of probation, and a fine of 615 million KRW.

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