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Koo Kwang-mo

LG Group chairman Koo Bon-moo’s death at the age of 73 on the morning of May 20 signals the arrival of the fourth generation of managers from the LG ruling family. Koo’s adopted son, 40-year-old LG Electronics vice president Koo Kwang-mo, was named as his successor and is set to take over the reins of group management alongside six professional managers.

At 9:52 am on May 20, Koo Bon-moo passed away at Seoul National University Hospital from complications related to a brain tumor.

“Chairman Koo, who declined treatment to prolong his life while fighting his disease for the past year, passed away peacefully with his family members by his side,” LG announced. His next of kin plan to hold a quiet family funeral at the hospital and are not accepting outside condolence calls or flowers.

With the LG family traditionally following a practice of management succession centering on oldest sons, Koo’s second younger sibling, 67-year-old LG vice chairman Koo Bon-joon, is expected to depart the group through a spinoff or other means. Some had predicted Koo Bon-joon might continue managing the group for some time under the “post-Koo Bon-moo system,” but analysts are now suggesting the group as a whole is moving in a coordinated way to establish a new system under Koo Kwang-mo instead.

For example, Koo Bon-moo’s younger brothers, Heesung Group chairman Koo Bon-nung, and the third, Heesung Group vice chairman Koo Bon-sik, have already established independence through spinoffs

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“In Koo Bon-joon’s case, no immediate changes [in plan] are expected, but it has been the group’s tradition for uncles to become independent and explore separate areas [once management has been passed on to the eldest son],” the group said.

Business world observers see the most likely scenario one in which Koo Bon-joon establishes several separate affiliates with LG International, where he is the largest individual shareholder with a 3.01-percent stake. LG International does not have investment ties with other group affiliates, resulting in equity structure that lends itself to spinoffs; Koo Bon-joon previously served as vice chairman there.

Koo Kwang-mo’s actual role and title appear likely to be decided after an ad hoc shareholders’ general meeting next month. Koo previously became a holding company registered director at a LG board meeting on May 17. After officially becoming a registered board member through an ad hoc shareholders’ meeting scheduled for June 29, an additional board meeting will take place to decide his role, standing, and title within the holding company.

Koo Kwang-mo, the figure set to become the LG Group’s fourth-generation leader, is the biological son of Heesung Group chairman Koo Bon-nung and was adopted by Koo Bon-moo. His adoption came in 2004 after Koo Bon-moo’s own son died at a young age.

In late 2014, he received 1.9 million shares in LG from his biological father Koo Bon-nung. The younger Koo joined LG Electronics as assistant manager in 2006 before being promoted in 2014 to managing director of the synergy and management strategy team of the LG holding company. His duties included organizing flagship industry and future projects for the group and planning project portfolios while promoting synergy among affiliates. Early this year, he transferred to project division chief (managing director) for LG Electronics’ B2B project headquarters.

the adopted son of LG Chairman Koo Bon-moo

Koo is expected to be assisted in his management of the group by six professional managers with the vice chairman title: Ha Hyun-hwoi of LG, Cho Sung-jin of LG Electronics, Han Sang-beom of LG Display, Cha Suk-yong of LG Household & Health Care, Kwon Young-soo of LG U+, and Park Jin-soo of LG Chem. With the early transition to a holding company system, no major issues appear to require resolution in the fourth-generation succession process apart from inheritance tax payment.

Some critics contend that Koo’s fourth-generation succession runs counter to proper management practices.

“Even internally, Koo Kwang-mo is seen as having produced no visible management results as managing director,” Bareunmirae Party lawmaker Chae Yi-bai observed in comments on May 18 opinion.

“One has to wonder whether this [succession] accords with LG’s ‘proper approach to management,’ which centers on fair treatment and proper competition,” he added.

At a 50-percent inheritance tax rate, Koo is expected to pay around 1 trillion won (US$924 million) in taxes if he inherits his adoptive father’s entire 11.28-percent stake in LG (19.45 million shares).

By Choi Hyun-june, staff reporters

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