Generational shift in chaebol raises hopes, concerns

By Choi Sung-jin

As the nation's family-controlled conglomerates undertake year-end personnel reshuffles, three trends stand out ― sharp downsizing, minimal promotions and generational change.

After some chaebol groups, including Samsung, GS, Doosan and Kolon, announced their executive lineups for key subsidiaries earlier this week, most noteworthy was the appearance of fourth-generation executives coming to the forefront of management.

Not only have grandchildren and great grandchildren of group founders become members of executive boards but non-family professional managers were replaced by younger CEOs in their early 50s.

For instance, Lee Kyu-ho, 31, great grandson of Kolon Group founder Lee Dong-chan, was promoted to become director of Kolon Industries Wednesday. In the Doosan Group, at least four great grandsons of founder Park Doo-byeong have already taken control of its core units as CEOs or executives.

At Samsung and GS groups, the advance of younger professional managers is also conspicuous, which industry sources attribute to their needs for developing new growth engines through the shift in generations as well as holding the older managers responsible for having failed to do so.

The sluggish corporate performances of major chaebol this year will likely lead to drastic trimming of payrolls at the higher levels. Samsung Electronics, for example, reportedly plans to slash the jobs of 400 executives, or one-third of the total of 1,200 this year. "The current number of executives is necessary when our quarterly operating profits amount to at least 10 trillion won ($8.6 billion), but profits remained at 7 trillion won this year," said an executive in charge of personnel affairs.

Up to 500 executives may have to leave the Samsung Group this year, while the number of new executives will be half that of those leaving, business watchers said. The same is true with the LG Group, which promoted only 120 to executive posts this year, down 10 percent from 2014, and Hyundai Heavy Industries, which let 100 executives go, one third of the total, in the latter half of this year alone.

Although these conglomerates cite generational change and "responsible management" as reasons for the reshuffle, complaints and criticism have been voiced within and outside of the chaebol.

The critics point out that too many managers from owners' families are not registered executives, meaning that they wield influence but do not take responsibility when things go awry. "That may raise serious problems particularly because many of them have been promoted with little competition and without proving their mettle as managers," said a staff member at Solidarity for Economic Reform, an anti-chaebol organization.

While acknowledging the need for belt-tightening to survive global recession, these critics took note of the fact that major groups seem to have failed to discover new talent that can take the lead in changing and renovating their business lines and operations. "Large businesses appear to be bent on maintaining the status quo rather than preparing for the future," said Chung Seon-seop, representative of Chaebol.com, a think tank that monitors major business groups.