Chey Tae-won, the Chairman of SK Group, has recently mentioned that he has a succession plan in place. This has piqued the interest of the Korean business community, as companies nowadays need to prepare well in advance for stable leadership in the future. Although some may argue that Chey, born in 1960, is still too young and active to discuss succession, the rising interest in succession scenarios suggests that it is never too early to start planning.
SK Group is structured as a holding company with SK Holdings and SK Discovery controlling its affiliates through intermediate holding companies or core subsidiaries. SK Holdings owns 30% of SK Telecom, 34.9% of SK Innovation, 40.6% of SKC, 41.2% of SK Networks, and 90% of SK E&S, while SK Discovery owns 34.1% of SK D&D, 40.9% of SK Chemicals, and 72.2% of SK Gas.
As of August, Chey and his related parties own 19,072,262 shares of SK Holdings, which is equivalent to 25.98% of the company's total shares. Chey is the largest shareholder with a 17.5% stake, while his sister, Chey Ki-won, chairwoman of The Happiness Foundation, owns 6.5%. Chey's younger brother, Chey Jae-won, who serves as the senior vice chairman of SK Group and CEO of SK ON, owns 0.4%.
Chey's wife, Roh Soh-yeong, who is currently undergoing a divorce, holds 0.01% of the company's shares, and their three children have no stake at all.
SK Group's succession scenario has recently gained attention as Chey's three children have started taking position in the group. Chey's eldest daughter, Yoon-jung, 34, oversees SK Biopharmaceuticals' strategy team. His second daughter, Min-jung, 32, took a leave of absence from SK Hynix last year to work in San Francisco, U.S., advising startups and working with nonprofit organizations (NGOs). The eldest son, Ji-won (28), works at PassKey, SK E&S North America.
Many believe that Chey will transfer his shares to his children but implement a system of professional managers. Chey has been using the "separate but equal" management philosophy since the early 2000s, which gives decision-making power to each affiliate board. Chey has expressed that even his children should compete and prove themselves before taking over the reins.
In a 2021 BBC interview about succession, Chey stated that anyone, including professional executives, has the opportunity to take over the management. He added that even his children could get the opportunity if they work hard. Chey said he wouldn't force his children to take over but agreed that their involvement in management would require board approval.
Chey and his associates will have their ownership in SK Holdings considerably reduced as a result of inheritance. As per the prevailing tax regulations, inheritances that exceed the value of 3 billion won are subjected to a 50% gift tax rate. Additionally, a surcharge of 20% is imposed on the transfer of shares held by the largest shareholder and their associates.
The law requires that Chey's assets must be divided equally between his common-law wife, Kim Hee-young, who is also the chairwoman of the T&C Foundation, and their child. The current law mandates that inheritance should be split without any discrimination between legitimate and illegitimate children. Kim was already recognized as a related party in Chey's tax code, even before the government issued a decree earlier this year to recognize biological fathers and mothers who are not married as related parties.
"I'm really thinking about it, and I need to be prepared for it (succession)," Chey said in a Bloomberg interview on Oct. 11, adding, "If something happens to me, who will lead the whole group? I need a succession plan."
But Chey added that it was not yet time to disclose his plan. He became the head of SK Group at 38, succeeding his father Chey Jong-hyun, who passed away in 1998. This year marks his 25th year as the chairman.
This article was originally published on Oct. 12, 2023.