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Korean Air Heiress Criticizes Her Brother For Going Against Father’s Wishes

This article is more than 4 years old.

The Hanjin Group–a conglomerate that controls Korean Air–has become embroiled in a dispute between the son and sister who inherited controlling stakes in the carrier after the death of their father, Cho Yang-Ho, last year. 

Heather Cho Hyun-ah, the eldest daughter of the family’s patriarch, criticized her younger brother by claiming their father “wanted the family to cooperate and run the business together.” Hanjin, she said, was “moving away from the late chairman’s last words.”

Cho’s only son, Walter Cho-Won-tae, 43, who holds the title of chairman, has the largest stake among his family members with 6.52% of the shares in the holding company, Hanjin KAL, giving him a small but decisive edge over Heather, who has 6.49% and their sister, Emily Cho Hyun-min, with 6.47%.

In a statement released by Heather’s lawyers, she pledged “to listen to various views of shareholders” after previously failing to hold “sufficient discussions about whom to name as head of the Hanjin Group.” 

Heather’s statement has raised the possibility that she may join with other shareholders to exert more control over management of the conglomerate. Heather gained considerably notoriety five years ago in what came to be known as “the nut rage incident,” when she lost her temper after a flight attendant served her macadamia nuts in a package rather than on a dish as the plane prepared for takeoff from New York.

She reportedly assaulted the flight attendant and used her authority as KAL vice president to order the plane to return to the terminal, but the incident soon mushroomed into a scandal that called into question the role of heirs in running Korea’s chaebols. After the story emerged in a court case and statements by crew members, she was sentenced to a year in prison for obstructing aircraft safety. 

Freed after five months, Heather lost her position as KAL vice president but resumed her place on the executive ladder as president of the KAL hotel subsidiary. In the uproar over the ease with which she had again been promoted into the executive ranks, however, she lost that post, too.

In the final analysis, however, it’s who owns the most shares that will determine who has control over Hanjin, including Korean Air. Heather could seek to wrest control from Walter by allying with Emily and also winning over their mother, Lee Myung-hee, with 5.31% of the shares, and assorted other relatives, holding a total of 4.15% of shares, to her side.

Hanjin KAL issued a statement saying that "managing a company must be done through due process and under related laws, such as shareholders' meetings and board meeting. We wish the latest controversy will not hurt the stability of the company's management or undermine its value.”

In the battle for control over Hanjin KAL, however, other substantial shareholders can influence the outcome. Foremost among these is Korea Corporate Governance Improvement, an equity fund dedicated to fighting for transparency in the interests of corporate governance.

KCGI has already disavowed any plot to seize control of the group, stating its sole goal is “to strengthen management efficiency and transparency.” Considering that it holds a 17.29% stake in Hanjin KAL, KCGI could potentially become a decisive player down the road. Right now, KCGI is said to be more focused on Hanjin KAL’s debt to equity ratio, which has risen to roughly nine to one.

Some of the other substantial shareholders include U.S. carrier Delta Airlines with a 10% stake, Korea’s enormous National Pension Fund with 7.34%, and Bando Engineering and Construction with 6.28%.

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