Cho Yang-ho, the chairman and CEO of Korean Air, has passed away in a hospital in the United States from what was being reported as lung cancer. He was 70.
Shares in Korean Air leaped 2.5% against a largely static KOSPI index on Monday morning, indicating possible investor hopes for improved corporate governance.
However, the news of Cho’s surprise death raised a cloud over both Korean Air and the Hanjin Group, the conglomerate which operates the airline, which shifted from net profits in 2017 to net losses in 2018.
Last month, Cho suffered the humiliation of being the first South Korean chairman ever voted off his board by his shareholders, most notably by the National Pension service, which, in the past, had been criticized for its refusal to hold corporate royalty to account.
The NPS and other investors appeared to have become fed up with allegations of corruption involving Cho – he was facing embezzlement and breach-of-trust charges – and endless cases of abuse committed by his family.
There was some speculation in Seoul on Monday morning that Cho’s death could have been suicide, given the repeated public humiliations and legal embroglios he and his family have been subjected to in recent years.
These issues hammered the airline’s reputation both locally – where some demanded the word “Korean” be dropped from the flag carrier’s name – and internationally, where newspapers have leaped on the abuses.
However, Korean Air is, like most major South Korean businesses, part of a family-run conglomerate, or chaebol, with a related leadership structure. The Cho family’s history of abusive behavior makes the late chairman’s likely successors possibly even more problematic.
His two daughters were removed from executive positions at the airline after being embroiled in incidents that made headlines worldwide. One hurled a glass of liquid over a contractor during a meeting.
The other, while flying first-class from New York, was so infuriated that her macadamia nuts were not served on a silver tray, she ordered the aircraft to taxi back to the terminal so the cabin attendant who had served her could be removed from the flight. This became known globally as the “nut rage” incident.
Various media consider Cho’s son Won-tae, who is also known as Walter, to be a likely successor. However, the younger Cho – a Korean Air president and board member – has also faced a string of issues.
Last year, after an investigation into irregularities surrounding his admission to Inha University – which was established by a Hanjin foundation – the education ministry demanded his university degree be revoked. In earlier incidents, he had been involved in a hit-and-run accident, assaulted a police officer and in a separate incident, allegedly abused and assaulted a senior citizen.
However, one issue hanging over any succession is the challenge from activist investment fund the Korea Corporate Governance Improvement Ltd, which demanded the Hanjin Group establish an independent committee to appoint top management.
Another issue, according to Bloomberg, was that Cho may have faced problems raising funds to pay high inheritance taxes – 50% – if he assumes his father’s 17% stake in the company.
South Korea’s notoriously high inheritance taxes have been a factor in a number of corporate scandals.