Chairman of scandal-prone Korean Air dies

Korean Air chairman and chief executive Cho Yang-ho arriving at a prosecutor's office in Seoul in June last year. The late Mr Cho, who was indicted last year on charges of embezzlement and breach of trust, denied the charges.
Korean Air chairman and chief executive Cho Yang-ho arriving at a prosecutor's office in Seoul in June last year. The late Mr Cho, who was indicted last year on charges of embezzlement and breach of trust, denied the charges.PHOTO: REUTERS

Death comes 2 weeks after shareholders ousted him from board over perceived leadership woes

SEOUL • Korean Air chairman and chief executive Cho Yang-ho died of a chronic illness yesterday, barely two weeks after shareholders ended his 27-year tenure on the board of the country's biggest carrier due to perceived leadership failings.

Shares of the family-controlled airline and its parent Hanjin KAL jumped on hopes of better governance under new management following the death of Mr Cho, 70. Analysts say the death raises the possibility of a bidding war over his stake in Hanjin, but his family would fight for control of the airline.

"Of course, his family will try to inherit his shares, but that can take time and money ... that opens a window for expectations about a takeover battle," said Shinyoung Securities analyst Um Kyung-a.

Inheritance tax the family needs to pay may amount to around 170 billion won (S$201.1 million), worth half the entire Hanjin stake held by Mr Cho, some analysts estimate.

Mr Cho's stake in Hanjin totals 17.8 per cent. Mr Cho, his relatives and the family's academic foundations own a total of 29 per cent of the holding firm. Mr Cho's only son, company president Cho Won-tae, is widely seen as his successor.

A South Korean activist fund is the No. 2 shareholder after the Cho family and recently boosted its stake to 13.5 per cent, vowing to take a role in management to fix poor governance.

Korean Air has been plagued by scandals involving founding family members, culminating in Mr Cho's indictment last year on charges of embezzlement and breach of trust. He denied the charges.

Troubles began in 2014 after his eldest daughter Heather made headlines when she lost her temper over the way she had been served nuts in first class and ordered the Korean Air plane to return to its gate at a New York airport. The "nut rage" incident tarnished the carrier's image, and subsequent scandals involving Mr Cho's daughters deepened concerns.

Shareholders forced Mr Cho off the board in a landmark vote on March 27, making him the first founding family member of any South Korean corporate giant to be ousted in such a manner. The vote added momentum to growing shareholder activism in South Korea, long dominated by family-run empires accused of ignoring minority investors.

Before his family's high-handedness became an object of public ridicule, Mr Cho was known for his business acumen. He built Korean Air into one of Asia's biggest, operating 166 planes with international flights to 111 cities in 43 countries.

He died from a chronic ailment in a Los Angeles hospital. A company official said Mr Cho had surgery for lung disease sometime ago and his condition had worsened over the past two years. But his death came as a surprise as his condition was not publicly known. Just last year, he had carried the torch for the Pyeongchang Winter Olympics.

Korean Air paid tribute to Mr Cho's enthusiasm, but conceded "not everything went well".

"Taking his passing as an opportunity, the family should change the way they have managed the company and employees in a fair and unforced way," said Korean Air flight attendant Park Chang-jin, who disclosed the "nut rage" case.

REUTERS

A version of this article appeared in the print edition of The Straits Times on April 09, 2019, with the headline 'Chairman of scandal-prone Korean Air dies'. Print Edition | Subscribe