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Legacy of LS Group founders creates ‘cousinhood’ management

The smooth power transfer among cousins stems back to the harmonious relations among their fathers who founded the LS Group in 2003 after splitting from LG Group

By Korea Herald

Published : May 10, 2016 - 17:54

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During the weekend, tributes were paid to a well-respected figure in the Korean business community.

LS Group’s cofounder Koo Tai-hwoi, honorary chairman of LS Cable & System, had passed away at the age of 93.

As the fourth brother of LG Group founder Koo In-hwoi, who had six brothers, he had founded LS Group, focusing on power equipment and energy sectors in 2003, with his two younger brothers -- Koo Pyong-hwoi and Koo Doo-hwoi. The four affiliates which formed the foundation of the group include LG Cable & System (currently LS Cable & System) and LPG supplier E1 and Yesco, after splitting from LG Group. 


The politician-turned-businessman had been well respected in his family and at work thanks to his harmonious leadership.

“He was such a generous man,’’ said LS Group chairman Koo Cha-yol at the funeral. The current group chairman is a nephew of the late Koo. He is the eldest son of the late Koo Pyong-hwoi, honorary chairman of E1.

As the eldest LS Group founding family member, the late Koo had played the role of a communicator and mediator to iron out family affairs and took a lead in creating a unique power transfer model, dubbed “cousinhood” management. 

Before the launch of the group, the three founding brothers in their 70s had agreed on remaining as shareholders and supporting power transfer among their eldest sons.

With the agreement, current LS-Nikko Copper chairman Koo Cha-hong debuted as the first group chairman, heading LS Holdings, the holding company of the group, in 2003.

Within a decade, the founding family endorsed the transfer of group chairmanship to his cousin Koo Cha-yol in 2013.

Witnessing the first power transfer at LS Group, market watchers forecast that Koo Ja-eun, vice chairman of LS Emtron and the eldest son of the late Koo Doo-hwoi, honorary chairman of Yesco, would be the strongest candidate for the chairmanship of LS Holdings in the future.

“The peaceful power transfer at LS Group is also attributed to a balance of shareholdings of the three founding families in addition to the harmonious family culture,’’ an industry source said on condition of anonymity.

The families of the three founding brothers hold a combined 30 percent stake in LS Holdings in the ratio 4:4:2.

LS Holdings controls key affiliates, including LS Cable & System, LSIS and LS-Nikko Copper, as the biggest shareholder.

“LS Group can maintain a stable governance structure unless there are conflicts among the three founding families,” said Jeon Yonh-ki, a stock analyst from Hyundai Securities & Investment.

However, it doesn’t seem to be an easy task to maintain amicable relationships in the second generation due to the growing family size. The three brothers have eight sons who are involved in the management of group affiliates.

According to another industry source, to coordinate management issues, the eight executives linked by blood reportedly host a coordination meeting on the first Friday of every month.

For now, the company’s real concern is to revive the business which is in a slump, not on governance issues. 

Sales of the industrial group manufacturing products such as power cable and power equipment fell to 25.5 trillion won ($21.7 billion) in 2014, hit by the prolonged global economic downturn. It had peaked at 29.3 trillion won in 2012.

By Seo Jee-yeon (jyseo@heraldcorp.com)