Korean Air chairman Cho Yang-ho has died from a chronic illness just two weeks after being ousted from the airline’s board, a development seen as opening the door for governance reform at the family-controlled carrier.
The 70-year-old tycoon, who was on trial on charges of embezzlement and breach of trust, was suffering from lung disease and his health had reportedly deteriorated since he was forced off the company’s board late last month.
Shares in Korean Air rose as much as 8 per cent on Monday following news of Mr Cho’s death, while the market value of the family-controlled holding company climbed by nearly a fifth as investors took the view that the South Korean group could now be better run under new management.
Given his death, Mr Cho’s criminal case will be dismissed. His son, Cho Won-tae, the company’s president and a board member, is widely expected to succeed his late father as chairman.
“The company is likely to face further pressure to improve governance under the younger Cho,” said Park Ju-geun, head of research group CEO Score. “With the combined shareholdings of his friendly forces being under 30 per cent, the incoming chairman will find it hard to ignore growing shareholder pressure.”
Some analysts said the possibility of a takeover battle also boosted the share prices, as the Cho family may have trouble paying inheritance tax worth about Won170bn for the elder Cho’s 17.8 per cent stake.
The stock was also buoyed by a potential challenge from a local activist fund, which has increased its stake in Hanjin Kal, the group’s holding company, to 13.5 per cent to become the company’s second-largest shareholder. KCGI, a domestic private equity fund, has vowed to take a role in management of Korean Air after criticising the company’s poor governance.
The three children of the late chairman each owns about 2.3 per cent of the holding company while state-run National Pension Service owns 7.3 per cent of Hanjin Kal.
The late Mr Cho was the first founding family member of a large South Korean company to be removed from a board, in a landmark vote by shareholders on March 27 that was seen as a milestone for shareholder activism in the country.
Mr Cho’s removal from the board of the country’s flag carrier after a 27-year tenure came as family members have been embroiled in a series of scandals from tax evasion to physical assault that caused an outpouring of public anger.
The trouble began with Mr Cho’s eldest daughter Cho Hyun-ah achieving international infamy in 2014 when she delayed a Korean Air flight after berating the cabin crew for the way they served her macadamia nuts. She received a suspended sentence for violating airline safety rules.
Her younger sister Cho Hyun-min found herself under police investigation last year for alleged assault and abuse of power after reportedly throwing water at an advertising agent — charges that she denied.
Mr Cho’s wife was investigated for physical assault of employees, while Mr Cho was indicted for dodging inheritance tax and embezzling company funds. Both Mr and Mrs Cho denied the allegations.
The litany of alleged crimes by the family have fuelled impatience in South Korea over the excesses of the country’s family-run conglomerates that dominate Asia’s fourth-largest economy.
Moon Jae-in, the country’s president, has vowed to rein in the power of big conglomerates, but his campaign for corporate reform has made little progress so far.
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