Two out of three business groups have more shares by relatives than chairperson

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Two out of three large business groups in South Korea chaired by the second generation have more shares held by family members and relatives than the chairperson, an analysis showed Tuesday.

Leaders Index, a local corporate analysis institute, looked into the 35 large business groups led by the second and higher generations of the founder out of the 81 conglomerates designated by the Korea Fair Trade Commission in May.

The analysis showed that 62.9 percent, or 22 business groups had a higher share held by relatives than the chairperson as of May. Relatives include in-laws and second cousins.

The chairperson owned an average of 3.44 percent internal stake in the 35 business groups, down 0.24 percentage point from five years ago, while relatives excluding the chairperson 5.86 percent, up 1.93 percentage points.

Leaders Index noted that the trend was more evident in business groups engaged in management succession over the last five years. It also noted that groups with higher shareholder percentages held by relatives than by the chairperson have a higher risk of facing potential conflicts over management control.

Among the 35 business groups, Hankook Tire & Technology Co. had the largest gap in shareholding percentage between the chair and relatives (43.02 percentage points).

Chairman Cho Yang-rai held a 0.11 percent stake in the company while the relatives excluding the chair 43.13 percent.

The difference at KCC Co. was 24.49 percentage points, Nongshim Co. 17.51 percentage points, AK Holdings Inc. 8.76 percentage points, and Samyang Corp. 7.38 percentage points.