Park Hyun-kyu, honorary chairman of Korea HC Group, ranked 75th in the business world with Korea Marine Transport as its core affiliate, announced on the 24th of last month that he signed a trust agreement for 1.33% equity of the group’s holding company, Korea HC.
This is interpreted as a measure for the future inheritance of equity by his eldest son, Park Jung-seok, who is currently managing the group at age 71, among others.
However, as the inheritors of the equity have not been clearly stated, some analysts suggest that the equity inheritance may target Park Jung-seok's two sons, Director General Park Tae-min and Park Tae-il, rather than Park Jung-seok himself. Park Jung-seok is also over 70 and is in a situation where he needs to prepare for succession. The Director Generals Park Tae-min and Park Tae-il are said to be in their 40s.
◇Korea Marine Transport grows to rank 75th in the business world
Korea HC Group is based on Korea Marine Transport, which was established in 1954. In 2023, it was first listed as a public disclosure target corporate group designated by the Fair Trade Commission, ranking 69th in the business world. Afterward, due to the decline of the global shipping industry, the rank fell to 75th last year.
The group's total revenue reached 3.552 trillion won as of 2023, with Korea Marine Transport's revenue accounting for 2.4944 trillion won (on an individual basis), making up 70%.
Korea Marine Transport has focused on short-distance container shipping routes primarily to Japan, China, and Southeast Asia, rather than the Americas and Europe, and has grown. In addition to Korea Marine Transport, Korea HC Group also has key affiliates like KCTC (formerly Korea Combined Transport), Korea Integrated International Transport, and KMTC Logistics.
Korea HC Group is currently led by Chairman Park Jung-seok. In fact, he is a professional manager from the second generation rather than the founding family. Korea HC Group has a unique governance structure divided between the professional manager family and the Lee Hak-cheol founding family.
The start of this governance structure dates back to when Honorary Chairman Park Hyun-kyu was recruited as Executive Vice President of Korea Marine Transport in 1970. Subsequently, Honorary Chairman Park, along with founding Chairman Lee Hak-cheol, led Korea Marine Transport, and after the passing of the founding chairman in 1980, he assumed the position of chairman.
Shin Tae-beom (97), chairman of KCTC and a known peer of Honorary Chairman Park from the Department of Navigation at Korea Maritime University, joined Korea Marine Transport around the same time as Honorary Chairman Park and played a leading role in the growth of the group. At the same time, the two professional managers established KCTC and engaged in equity investments, becoming major shareholders of core affiliates in the group following founding Chairman Lee Hak-cheol. They also prepared for a second-generation management system.
Currently, Chairman Park Jung-seok and President Shin Yong-hwa (63), who are in charge of Korea Marine Transport and Korea HC respectively (in a co-representation system), are the key figures. President Shin Yong-hwa is the younger son of Chairman Shin Tae-beom.
Chairman Park Jung-seok worked for Ssangyong Investment & Securities (now Shinhan Investment Corp.) for about 10 years before joining KCTC in 1992, serving as vice president and other roles until he became the representative of Korea Marine Transport in 2007 and chairman in 2016. President Shin Yong-hwa, who has also served as executive vice president and vice president of Korea Marine Transport, rose to the position of representative director in 2016.
In 2014, the governance structure was established by transitioning to holding company Korea HC. Korea HC holds 42% equity in Korea Marine Transport, controlling subsidiaries such as KMTC Logistics, Korea Ferry, and Hana Shipping through Korea Marine Transport.
Currently, Chairman Park Jung-seok holds 24.68% equity in Korea HC. When combined with his younger brother Vice President Park Joo-seok's 23.81% equity, they hold a total of 48.49%, making them the largest shareholders. President Shin Yong-hwa and his elder brother Shin Yong-gak also hold 4.34% and 7.94% equity in Korea HC, respectively. Shin Yong-gak is known to not participate in the group's management.
The families of Chairman Park Jung-seok and President Shin Yong-hwa have inherited the control of Korea HC Group from their fathers.
However, the founding family is not completely excluded from the group's management. Lee Dong-hyuk (78), the eldest son of founding Chairman Lee Hak-cheol, holds 40.87% equity in Korea Marine Transport. Although he is the largest shareholder as an individual, this is lower than the combined equity (about 52%) held by Korea HC, Chairman Park Jung-seok, Vice President Park Joo-seok, and President Shin Yong-hwa, and Shin Yong-gak.
Former chairman Lee Dong-hyuk is currently a member of the board of directors at Korea Marine Transport (as a non-executive director) and is involved in major management issues of the company. He served as the representative of Korea Marine Transport from 1985 to 2004, succeeding Honorary Chairman Park Hyun-kyu, but later withdrew from active management. It is known that he experienced conflicts with professional managers like Chairman Park Jung-seok.
◇Unclear third-generation succession structure…improving performance is also a challenge
The unclear third-generation succession structure in Korea HC Group's governance is a challenge that needs to be addressed. The structure, which involves three families with control: the founding family of Lee Dong-hyuk and professional managers like Chairman Park Jung-seok and President Shin Yong-hwa, could pose risks during the third-generation succession process.
Currently, the two sons of Chairman Park Jung-seok, Director General Park Tae-min and Director General Park Tae-il, each hold 0.01% equity in Korea Marine Transport. In addition, Director General Park Tae-min holds 1.18% equity in KCTC, while Director General Park Tae-il has 2.33%.
However, they do not hold any equity in the holding company, Korea HC. It is said that for the two sons of Chairman Park Jung-seok to inherit management rights, they need to increase their equity stake in Korea HC.
One governance expert noted, "In a situation where both the founding family and President Shin Yong-hwa's family have control, the succession process may be challenging, as disputes often arise between partners when passing on equity to children."
The deteriorating performance of the core affiliate, Korea Marine Transport, is also a problem. Due to the downturn in the shipping industry, Korea Marine Transport recorded an operating loss of 41.1 billion won in 2023, marking a return to the deficit. Revenue was 2.4944 trillion won, a 48% decrease compared to 2022.
Korea Marine Transport believes that its performance improved last year compared to 2023. However, major European shipping companies are entering the Southeast Asian market, which is Korea Marine Transport's main route, making it uncertain how the market will unfold this year.
An industry source stated, "European shipping companies like Maersk are actively entering the Southeast Asian market, which is relatively less affected by the U.S.-China tensions arising from Trump, and it is critical for Korea Marine Transport to maintain its position in this market going forward."