SK Family Control

The workings of Korea's top conglomerates is fascinating. Much of this centers on family control. This article, although complex, highlights issues with SK, a top ranked Korean business group and its leadership.


Korea Times notes:

In SK, two groups of siblings sharing the same surname with different spellings are trying to split from each other. [ There are two ways to spell the same Korean name in English Chey and Choi.]

On one side are SK Corp. chairman & CEO Chey Tae-won, 44, and SKE&S vice chairman Chey Jae-won, 42.

On the other are their cousins, SKC chairman Choi Sin-won, 53, and SK Chemicals vice president Choi Chang-won, 41.

The SK Corp. chairman and his brother Jae-won take charge of the business units of energy and telecommunications. The SKC chairman and his brother Chang-won manage the petrochemicals and biotechnology units.

SK Group, established in 1962 as the nation's first petroleum company, is now jointly managed by the Chey and Choi brothers. SK founder Chey Jong-kun is father to one pair of brothers while his younger brother Choi Jong-hyun is father to the other pair. The two fathers have passed away.

A strong hint of a SK split-up comes from Chey Tae-won, who said, ``Going separate ways means going professional.'' Chey survived an attempt by a foreign fund to topple him from the SK throne, but was put behind bars for irregularities, two developments that, according to industry watchers, are adding spurs to SK's moves to split.

Given these recent developments, they must be reshaping the SK Group into two `small groups' under the name of SK by focusing on core business areas, said Kim Ki-shik, director of the People's Solidarity for Participatory Democracy (PSPD), South Korea's most activist civic organization.

As of December 2005, SKC chairman Choi Sin-won aggressively raised his stakes in the polyester film manufacturer to 0.81 percent from 0.28 percent a year earlier. Combined with those of SKC president Park Jang-suk, his younger sister's husband, his stakes reach 1 percent.

SK Chemicals vice president Choi Chang-won also bought more stakes in the producer of ``Sunpla,'' a third generation anti-cancer substance, to push his shares to 9.02 percent from 5.69 percent during the same period.

By contrast, the Chey brothers maintained their stakes in the two companies as they are. Little change was made in SKC stakes held by SKE&S vice chairman Chey Jae-won, 0.30 percent, and in SK Chemicals stakes owned by SK Corp. CEO Chey Tae-won, 6.37 percent.

Moreover, at the end of last year, Choi Chang-won disposed of his 2.23 percent share of the Walkerhill Hotel in southeastern Seoul to Chey Jae-won. Chey Tae-won who owns 40.7 percent of the hotel is the biggest shareholder.

The disposal of Walkerhill stakes seems to be part of preparations to launch a small streamlined group, gradually weaning from the parent SK group. SKC and SK Chemicals, evidently, did restructuring last year,'' Kim Sun-woong, executive director of the Center for Good Corporate Governance (CGCG), said.

In an apparent effort to go independent from SK Group, said Kim at the PSPD, SK Chemicals sold 1.54 percent of SK Corp's stakes last year. So it's safe to say Korea's leading chemicals company now has around 99 billion won ($100 million), in its ammo for business expansion.

The Choi brothers bought 0.94 percent of SK Chemicals by May last year, more than the 6.84 percent owned by Chey Tae-won. Surprisingly, early this year, Choi Chang-won obtained 10.32 percent of the firm, becoming its biggest shareholder.

Some market analysts see this stake sale as a sign of a possible group division though SK Corp. dismissed speculation that it sold its interests to protect managerial rights from a hostile merger and acquisition. Others see that SK Chemicals established SK Chem to make profits in the chemicals business as the sign.

Both SK Chemicals and SKC plan to strengthen their businesses over the next five years by increasing facility investments at home and abroad. They will also increase the number of affiliates to form a small group and research and development investments.

Now, SK Chemicals operates eight subsidiaries in petrochemicals and related business areas. But SKC and SK Chemicals balked at the argument that it is just a matter of time before the SK Group is on the verge of a two-pronged separation.

Meanwhile, SK Corp. chairman Chey Tae-won owns 0.87 percent of SK Corp. but his stakes in SK C&C, SK Group's holding company and the group's IT service provider, 11.02 percent, guarantee him the governing power of the whole group.

He will spend over 3 trillion won for the takeover of Inchon Oil to strengthen the group's energy business this year, after selling SK Life to Mirae Asset and SK Teletech to Pantech & Curitel last year.