South Korean court rules against women in LG inheritance lawsuit

SEOUL – Three women from a dynastic South Korean family lost an inheritance lawsuit on Feb 12 that challenged the male-dominated practices governing family succession at one of the country’s largest and most powerful conglomerates.

The widow and two daughters of the deceased former chairman of LG, who died in 2018, filed a lawsuit three years ago seeking to invalidate an inheritance agreement that forfeited their claims on an estate worth more than US$1 billion (S$1.26 billion). They said they agreed only because they were deceived by LG officials who sought to ensure succession for the company’s current chairman Koo Kwang-mo.

The three women said company executives told them that former chairman Koo Bon-moo had left a will that bequeathed everything to Mr Koo Kwang-mo.

Later, the former chairman’s widow Kim Young-shik and her daughters Koo Yeon-kyung and Koo Yeon-sue learnt that there was no will. The women sought to have the assets instead distributed in accordance with South Korean legal standards that were more favourable to them.

The lawsuit provided a rare glimpse into the inner workings of the wealthy families who run South Korea’s powerful corporate conglomerates, also known as chaebols, and serve as the backbone of the South Korean economy. The country’s most successful companies, including Samsung and Hyundai, are still controlled by their founders’ offspring through complex shareholding structures.

Corporate governance watchdogs have long argued that some chaebol families frequently prioritise their interests over what is best for other shareholders, and treat the companies as a private fief rather than publicly traded, global multinationals.

The inheritance fight at LG revealed fissures within the Koo family, long considered one of the most harmonious chaebol families since the company was founded nearly 80 years ago. But that facade started to crumble after Mr Koo Bon-moo, the founder’s grandson, who took over the company in 1995, died eight years ago.

On Feb 12, in front of a packed room of reporters at Seoul Western District Court, Judge Koo Kwang-hyun, who is not related to the LG Koo family, handed down the decision to dismiss the lawsuit and left the room.

In a three-page summary judgment, Judge Koo said it was difficult to conclude that LG officials had engaged in deceptive conduct. The judgment also stated that while LG finance officials, and not the women, had affixed their legal seals on the inheritance agreement, they did so with proper authorisation.

“The plaintiffs’ claims lack merit and are therefore dismissed in their entirety,” the judgment said.

In a joint statement, the three women said they “deeply regret” the court’s ruling, saying it was based on “one-sided testimony and materials” of LG finance officials. The women said they intend to appeal.

“This lawsuit goes beyond the assertion of individual rights,” the statement said. “It seeks to end the unjust practice whereby a particular organisation monopolises information, distorts inheritance procedures and arbitrarily determines corporate governance structures.”

Yulchon, the law firm representing the current chairman of LG, said “the court has confirmed that the inheritance agreement was executed in accordance with proper legal procedures and reflected the true intentions of the parties”.

The Koo family started preparing for succession years earlier when the former chairman’s teenage son died of a heart attack in 1994. In LG’s tradition of male primogeniture, the company was left with no obvious successor. Mr Koo Bon-moo and his wife agreed to adopt their eldest nephew Koo Kwang-mo, setting him up to run the company one day.

However, the former chairman’s death in 2018 left a power vacuum.

Some within the company and the Koo family worried that Mr Koo Kwang-mo – barely 40 at the time – was too inexperienced to become chairman of the giant conglomerate, and argued that Mr Koo Bon-joon, the deceased chairman’s brother who had been temporarily running the company, should remain in the role in the interim.

What happened next is central to the women’s claims. Ms Kim, the widow, who remains one of the company’s biggest shareholders, said she was told by Mr Ha Beom-jong, the former chairman’s aide and now LG’s president, that her deceased husband had left a will expressing his wishes that Mr Koo Kwang-mo inherit all of his shares.

In court, Mr Ha denied ever telling the women there was a will. He said it was a “memo of intent” that the former chairman had signed before his death and that company officials later shredded.

Ms Kim said she was still in shock at her husband’s death, and she was told that she had to give up her inheritance rights to ensure a peaceful transition for her adopted son and fend off a succession challenge.

Ms Kim agreed to allow Mr Koo Kwang-mo to inherit most of her late husband’s LG shares, worth roughly US$850 million at current prices. A smaller portion of the former chairman’s stock went to the two daughters. By acquiring those shares in LG, Mr Koo Kwang-mo strengthened his hold on the company. He currently owns roughly 16 per cent of the company’s shares.

LG, which did not issue a company comment after the ruling on Feb 12, has called the women’s allegations “baseless” and suggested that the women were seeking to challenge for management control, which they have denied. NYTIMES