[Business & Issues] "Going to Court"... Chairman Currently in Litigation

Lee Jae-yong, Chairman of Samsung Electronics; Chey Tae-won, Chairman of SK Group; Chung Eui-sun, Chairman of Hyundai Motor Group; Koo Kwang-mo, Chairman of LG Group; Shin Dong-bin, Chairman of Lotte Group... Their commonality lies in being wealthy chaebol heads and simultaneously living lives not free from various lawsuits and judicial risks. Even when expanding beyond the top 10 groups, it is rare to find chairmen who have not experienced lawsuits or judicial risks. Many of them serve as heads but remain non-registered executives, thus avoiding direct responsibility. The various lawsuits and judicial risks they bear are also reasons why they remain non-registered executives.

Samsung Electronics Chairman Lee Jae-yong arrived at the Seoul Central District Court on the 17th to attend the first trial's final hearing on the unfair merger of Samsung C&T and Cheil Industries, and is heading to the courtroom. Photo by Heo Young-han younghan@

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Among the heads of the top 10 domestic conglomerates (Samsung, SK, Hyundai Motor, LG, Lotte, Hanwha, GS, HD Hyundai, Shinsegae, CJ), six are registered as non-registered executives in their affiliates: Lee Jae-yong of Samsung Electronics, Chey Tae-won of SK Group, Shin Dong-bin of Lotte Group, Kim Seung-yeon of Hanwha Group, Lee Myung-hee of Shinsegae Group, and Lee Jae-hyun of CJ Group. This means that 6 out of 10 avoid the managerial duties and responsibilities that come with being registered executives while effectively acting as the heads. Among them, Lee Jae-hyun, Shin Dong-bin, Lee Myung-hee, and Kim Seung-yeon received tens to hundreds of billions of won in compensation from companies where they are registered as non-registered executives, according to the 2022 business reports.

Whether Lee Jae-yong’s appointment as a registered director will be included in the agenda at Samsung Electronics’ regular shareholders’ meeting in March is one of the main concerns of shareholders. This is because Samsung Electronics’ performance has fallen to its lowest level since the global financial crisis in 2008, necessitating strengthened responsible management. Non-registered executives exercise management rights but bear no legal responsibility. They wield enormous authority and influence in major decision-making processes while avoiding accountability, drawing criticism. However, Lee Jae-yong’s return as a registered executive is currently unlikely. Existing judicial risks remain unresolved and burdensome, providing no reason to take on the added legal responsibility of being a registered executive. Although he was promoted from vice chairman to chairman in October 2022, he has yet to be registered as an executive.

Lee stepped down as a registered executive on October 26, 2019, after completing a three-year term as vice chairman. He was unable to serve as a registered executive due to being on parole related to the political scandal and employment restrictions. After being reinstated by a special pardon on August 15, 2022, and promoted to chairman, he became eligible to be registered as an executive. However, he still faces judicial risks related to the unfair merger of Samsung C&T and Cheil Industries and allegations of accounting fraud at Samsung Biologics, making a return as a registered director burdensome. The first trial verdict related to the remaining judicial risks is scheduled for the 26th.

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Divorce is a private matter, but since property division issues follow, a corporate chairman’s divorce lawsuit is not entirely separate from corporate management. The divorce proceedings between Chey Tae-won, Chairman of SK Group, and Noh So-young, Director of Art Center Nabi, began in July 2017 when Chairman Chey filed for divorce mediation at the court. When mediation failed due to Noh’s opposition, the two entered full-fledged divorce litigation, which is still ongoing, entangled with property division and alimony issues.

On December 1, 2022, the court ruled in the first trial that Chairman Chey must pay Noh 66.5 billion won as property division and 100 million won as alimony. Initially, Noh demanded 300 million won in alimony and 50% (about 6.49 million shares) of Chairman Chey’s SK Inc. shares as property division in the first trial. However, the court ruled that the SK Inc. shares were “separate property” (property owned by one spouse before marriage or acquired in their name during marriage) and excluded them from property division, as Noh could not be seen as having substantially contributed to their formation, maintenance, or value increase. The court accepted Chairman Chey’s claim that the shares originated from inheritance and gifts from his late father, the late Chairman Chey Jong-hyun.

The lawsuit between Chairman Chey and Noh is ongoing as both parties appealed the first trial. During the appeal, Noh increased her claim for property division and alimony from the initial trillion-won level to the two trillion-won level. She also changed the form of the property demanded from shares held by Chairman Chey to cash. The alimony lawsuit is also ongoing. In March last year, Noh filed a lawsuit seeking alimony worth tens of billions of won, claiming that Kim Hee-young, director of the T&C Foundation and Chairman Chey’s cohabitant, caused the breakdown of the marriage and inflicted severe mental distress.

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At the center of the LG family inheritance lawsuit is Koo Kwang-mo, Chairman of LG Group. Chairman Koo completed payment of over 700 billion won in inheritance tax related to the assets he inherited from the late Koo Bon-moo, the previous chairman who passed away in 2018, using the installment payment system. Although the inheritance tax has been paid, lawsuits over the inherited assets are still ongoing. Chairman Koo’s mother, Kim Young-sik, and his younger sister, Koo Yeon-kyung, CEO of LG Welfare Foundation, and Koo Yeon-soo filed a lawsuit against Chairman Koo seeking recovery of inheritance.

The late Chairman Koo Bon-moo left assets worth about 2 trillion won, including 11.28% of LG shares, and Chairman Koo inherited 8.76% of LG shares. Meanwhile, the three women received about 500 billion won. In media interviews, the three women explained that the reason for filing the inheritance recovery lawsuit was that although there was an agreement that Chairman Koo would bear the inheritance tax alone in exchange for inheriting a large portion of the estate, contrary to the agreement, the three women had to pay the inheritance tax and take out loans. They also said they only later found out that Chairman Koo received much more inheritance than initially agreed.

On the other hand, Chairman Koo’s side maintains that the distribution process and procedures of the inheritance shares were already agreed upon and there is no problem. LG has followed the principle of primogeniture succession, where the eldest son inherits the group chairmanship, and has distributed inheritance, including shares, according to family principles to maintain stable management rights. LG also stated that according to an agreement among heirs at the end of 2018, each party was to pay inheritance tax according to the inherited assets, and the three women actually paid all four inheritance tax payments from the end of 2018 to the end of 2021. It is known that since the lawsuit was filed, the three women have not paid inheritance tax, and Chairman Koo has paid it instead.

Ourhome, a comprehensive food company, has also seen sibling conflicts over management rights since 2016, which have yet to be resolved and have escalated into lawsuits. Last year, the eldest son and former vice chairman Koo Bon-sung (the largest shareholder of Ourhome), who was indicted for embezzling a large amount of company funds, filed a lawsuit against his younger sister, Koo Ji-eun, on charges of breach of duty, intensifying the conflict.

Koo Bon-sung claimed, “Koo Ji-eun (CEO) and Koo Myung-jin, an inside director, knew that the resolution approving the director’s remuneration limit at the 2023 Ourhome shareholders’ meeting was illegal, yet received large director remunerations through it, causing damage to the company.” On the other hand, Koo Ji-eun’s side stated, “Since the company’s founding, resolutions setting the total remuneration limit for all directors have been made under the view that directors who are shareholders are not special interested parties, so there is no legal problem.” Although Koo Bon-sung has stepped down from frontline management, he remains the largest shareholder with 38.56% of Ourhome shares and is attempting to return to management, so the sibling management dispute is expected to continue for the time being. Koo Ji-eun holds 20.67%, and Koo Myung-jin holds 19.60% of shares.

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