Lotte chief executive and its founder Shin Kyuk-ho's younger son Shin Dong-bin takes de facto control of Lotte Korea and Japan.
According to multiple local media outlets, Shin Dong-bin became chief of 11 investment companies in Japan late June which own more than 70 percent of Hotel Lotte's shares. Hotel Lotte is currently serving as a holding company of the group’s Korea's key affiliates.
Last December, when the founder's first son Shin Dong-joo was removed from key posts of Lotte Japan's three affiliates, there has been prospect that Dong-bin would be responsible for both Lotte Korea and Japan. Last month, he was assigned to be chief of Lotte Japan.
"After Shin Kyuk-ho stopped shuttle management - spent shuttling between Korea and Japan for a month - in 2011, Dong-bin stayed longer in Japan to take care of management of affiliates. Since then, there has been prospect that he would eventually take on Lotte Japan," said a senior executive of the group declining to be identified.
Since Shin Kyuk-ho stopped his shuttle management between Japan and Korea after Tohoku earthquake and tsunami in 2011, Dong-bin has filled up his father's vacancy.
One industry observer said "There is a high possibility that Dong-bin prepared for power dominance a long ago as his old father may not take care of management for long," adding that, "Behind the removal of first son Dong-joo from key posts late last year and this year was Dong-bin not the founder."
Market watchers said it is time for Dong-bin, who takes de facto power of the group, to move on to deal with the crisis the group faces. Due to the power struggle between the two brothers, public sentiment was going against the group and the government is keeping an eye on the company for its opaque and entangled corporate structure.
Kim Jung-hoon, lawmaker of the ruling Saenuri Pary said, "It is not normal to manage a company through cross-shareholding,” pointing to Lotte Group.
Finance Minister Choi Kyung-hwan also said, "We are paying a keen attention to the company. If necessary, we will closely look into the opaque corporate governance structure and money flow."
The Korea Fair Commission is also pushing ahead to make a law which makes the local conglomerates to publicly announce their management information of foreign affiliates.
Apart from the government, Lotte should also deal with the public sentiment against the company. Since the battle between the two bother started, a series of civic groups emerged to boycott Lotte's products.
Apart from the reason that the holding company of Lotte turned out to be a Japanese company, the public is upset at the behavior of the owner family who views the company as their own property.
"As the Lotte incident occurred in the lead-up to the 70th anniversary of 8.15 Independence Day, the public sentiment became more against the group. If it lasts longer, it can be critical to the retail company," one market observer said.
Since July 28 when the management battle came to the surface, Lotte lost 2 trillion won in stocks.
In order to deal with the public sentiment issue, Lotte unveiled youth employment measure on Friday.
Market watchers said as the company is not able to solve its management and corporate structure issue in a short time, it tries to highlight its identity that Lotte is a Korean company by actively participating in dealing with youth unemployment issue, which is currently the biggest issue in Korean society.
