Leadership vacuum hits Korean chaebol CJ stocks

2013-06-25 17:27

Leadership vacuum hits CJ stocks

By Kim Tae-jong
CJ Group and its affiliates face a leadership vacuum because Chairman Lee Jay-hyun is under investigation for allegedly creating massive secret funds and evading payment of taxes.
CJ Cheiljedang’s stocks fell by 3.89 percent to close at 247,000 won, while CJ E&M plunged by 6.41 percent to end at 32,850 won. In comparison, the benchmark KOSPI fell by 1.02 percent to close at 1,780.63 that day.His older sister, Lee Mi-kyung, serves as vice chairwoman of CJ Entertainment & Media, while his other siblings and children have rarely been involved in management..
CJ Group was founded as Cheiljedang in 1953 by Samsung Group founder Lee Byung-chul as a sugar and flour manufacturer.
It was part of Samsung until it separated in 1996 and changed its name to CJ and has since actively advanced into various industries including food service, pharmaceutics, entertainment, home shopping and logistics.
As of the end of last year, the group has 223 affiliates at home and abroad with major affiliates including CJ Cheiljedang, CJ CGV, CJ Entertainment and CJ O Shopping. The group ranked 14th in terms of sales, which stood at 26 trillion won last year.
Behind the fast growth and success is Lee, who became the chairman of the group in 2002.
He was appointed as vice-chairman of the former body of CJ in 1998, as his grandfather was the Samsung Group’s founder. Although his father Lee Maeng-hee is the eldest son of the founder, the group was succeeded by current Samsung Group Chairman Lee Kun-hee.
Lee Jay-hyun was able to secure his management power thanks to the help of his uncle Sohn Kyung-shik, a brother-in-law of his father. Sohn, who is the chairman of the Korea Chamber of Commerce and Industry, served as co-chairman of CJ together with his nephew.
The CJ chairman strengthened his influence over the group and its affiliates by reforming the group’s governance structure after establishing CJ Holdings in 2007.
He now owns a 42.3 percent of shares of the holding firm, which is at the center of management of all affiliates by holding a large portion of their shares.
But his siblings have little influence on the management of the group with little or no shares of the group. His older sister Lee Mi-kyung serves as vice chairwoman of CJ Entertainment & Media (CJ E&M), only holding a 0.15 percent of share of the firm. His younger brother is Lee Jae-hwan, CEO of JS Communications, an advertising company independent from CJ, which has no relation to CJ Group.
Given the importance of Lee at the group, his absence could strike a severe blow to the group, and investors also sensitively responded to the news about his presence before the prosecution Tuesday, with stocks of the group’s major affiliates experiencing a nosedive.