In 2000, two sons of Hyundai founder Chung Ju-yung locked horns over the control tower of Hyundai Group, which was then the country’s largest business conglomerate.

Ju-yung’s second son, Mong-koo, who was acting as the eldest following the death of the first son, collided with the fifth son, Mong-hun, over several issues while their father was recovering from his defeat in the 1997 presidential election.

The conflict peaked when Mong-koo unilaterally sacked Lee Ik-chi, former chairman of Hyundai Securities, while Mong-hun was away. Infuriated, Mong-hun returned three days later, visited his father and annulled the decision, firing Mong-koo instead. After months of a who-said-so spat, Ju-yung announced the step-down of all of them, himself included, but later supported Mong-hun as his successor. 

The family feud in the Hyundai founding family led to the spilt of the group. Mong-koo took the automotive portion and nine other parts of Hyundai Group and established Hyundai Motor Group. His youngest brother Mong-joon walked out of the group with the heavy industries as well as the shipbuilding business arm.

Mong-hun had a tragic ending. He ended his own life in 2003 after being grilled about several alleged irregularities. 

Another case is Kumho Group. Two sons of Kumho Group founder Park In-chon -- Sam-koo and Chan-koo -- also had split the group recently as the court acknowledged the businesses led by the two are de facto separate enterprises. Sam-koo leads Kumho Asiana Group and Chan-koo took over Kumho Petrochemical.

The friction was first detected when the younger Chan-koo in 2009 announced that he would take eight affiliates of the group and walk away, after seeing Kumho Group suffering from a grueling walkout process. Under the elder Sam-koo, the company has become the country’s eighth-largest conglomerate after buying Daewoo E&C and Korea Express. But this strained the company’s coffers and caused bankruptcy.

An agitated Sam-koo filed complaints against the prosecution about Chan-koo’s alleged creation of a slush fund, as well as the infringement of trademark and other claims. While some of the legal battles are still ongoing, the court granted the separation of the companies. The brothers are reportedly not on speaking terms.

Legal battles

Hanjin Group, better known for its flagship carrier Korean Air, has also suffered strife of a kind after company founder Cho Joong-hoon passed away in 2002, leaving the control over the group to the eldest Yang-ho.

The second son Nam-ho was given the heavy industries portion and the fourth son Jung-ho established Meritz Securities and split in 2005.

In 2006, Jung-ho and Nam-ho filed a suit against Yang-ho claiming that the father’s will was fabricated and that Yang-ho may have orchestrated the forgery. The court later ruled in favor of Yang-ho. 

The Doosan Group brothers also waged a legal battle. In 2005, the second eldest and then-chairman Park Yong-oh filed a complaint against his two younger brothers, Yong-sung and Yong-maan, for having allegedly created a slush fund of 100 billion won ($85 million).

This was made after he was stripped of his post by Young-sung and was denied the ability to establish a company of his own with a few Doosan affiliates. Yong-oh was disavowed from the family for the “betrayal.” He took his life in 2009.

Hyosung Group chairman Cho Suck-rai’s second son Cho Hyun-moon in 2014 reported his older brother and Hyosung heir Cho Hyun-joon alongside eight company executives to prosecutors for embezzlement and breach of conduct.

Hyun-moon, who left the company in 2013 and started a career as a lawyer, urged his father, saying, “The third generation of conglomerates are faced with different needs to their fathers, that they need to make money with honest means and take more social responsibility.”

Reconciliation

Samsung Group founder Lee Byung-chul’s eldest son Maeng-hee took everyone by surprise in 2012 when he filed a suit against his younger brother and group chairman Lee Kun-hee. He demanded 710 billion won as part of the inheritance from his father.

Maeng-hee, alongside his sister Sook-hee, claimed that Kun-hee had been keeping more than 4 trillion won in inheritance from Byung-chul secret and that they deserved a portion of it. The case was dismissed two years later.

Despite strife between the two brothers, Kun-hee’s eldest son Jay-yong signed a petition asking for Maeng-hee’s imprisoned son and CJ chairman Jae-hyun’s bail or parole, hinting at the thawing of ice between the families.
Hanwha chairman Kim Seung-youn and his younger brother and Binggrae chairman Ho-youn also had a spat in 1992 after Ho-youn demanded that Seung-youn hand over the retail arms of the company. However, they made up in 1995 at their mothers’ 70th birthday party.

Patriarchal governance

The biggest reason for the repeated family feuds at chaebol is the outdated governance structure where the patriarch has the dominant power to choose the successor. Even today, there are few conglomerates that run a system to evaluate the managerial capability and leadership of CEO successor candidates.

“In such cases, the sons will strive to win the favor of their fathers, rather than anything else,” said Chung Sun-sup, CEO of chaebol.com.

By Bae Ji-sook (baejisook@heraldcorp.com)