On the 25th of last month, Kim Se-min (36), the eldest son of Lee Soo-geun, chairman of ISU Group, was promoted to president of ISU Holdings, sparking speculation about the commencement of 'third-generation management.' However, since Chairman Kim still dominates the entire group, many point out that it is premature to consider this a full generational transition.
Chairman Kim essentially controls 29 affiliates with only about 20% equity through a 'roof-over-roof' governance structure, positioning ISU EXA CHEM at the top of the holding company. He has hardly transferred equity in core affiliates to his eldest and second sons, resulting in their respective equity stake being merely around 0.1%.
◇ The origin is ISU Chemical… a leap to the 114th ranking mid-sized group in the industry
ISU Group started in 1969 with ISU Chemical, established by Chairman Kim's father, Honorary Chairman Kim Jun-sung.
Starting as the only manufacturer of alkylbenzene in Korea, ISU Chemical has now grown into a mid-sized group with a market capitalization of approximately 3.4 trillion won. The company has diversified its business into sectors such as chemicals, IT, construction, bio, and smart farming, boasting a total of 29 affiliates (4 listed, 25 unlisted).
Key affiliates include ISU Chemical, ISU PETASYS, and ISU Specialty Chemical, among which ISU PETASYS has garnered attention from global corporations like Google and NVIDIA based on its multilayer printed circuit board technology.
However, the performances differ. As of 2024, ISU Chemical recorded sales of 1.9162 trillion won but suffered an operating loss of 51.4 billion won. In contrast, ISU PETASYS reported an operating profit of 101.8 billion won, demonstrating strong performance.
◇ Dominating 29 affiliates through a 'roof-over-roof' governance structure... evading responsibility
Since the transition to a holding company structure in 2003, Chairman Kim has established a structure that links ISU EXA CHEM → ISU → affiliates. Holding 100% equity in ISU EXA CHEM, he exercises effective control over the holding company with 73.4% of ISU's equity directly held by him.
In this structure, Chairman Kim received a compensation exceeding 20 billion won last year, ranking first in salaries for mid-sized companies.
Including a retirement allowance from ISU Chemical (13.8 billion won), he also received 1.4 billion won and 2.5 billion won from ISU Specialty Chemical and ISU PETASYS, respectively.
The dividend income through the personal company EXA CHEM has amounted to 9.6 billion won since 2015.
Nevertheless, he is still serving as an unregistered executive in all three key affiliates. He exercises practical management rights without bearing any responsibility. Experts point out that "power without responsibility is a governance issue."
◇ Father holds 100% equity, son holds 0%... long way to go for third-generation management
Chairman's eldest son, Kim Se-min, has been leading digital transformation by overseeing Biz Innovation within the group since being promoted to executive director of ISU in 2020.
Recently promoted to president has raised expectations for third-generation management, but evaluations indicate that the transfer of equity is still insufficient. There were also reports of the second son, Kim Se-hyun, being active within the group, but the company stated that such claims are "baseless."
The equity held by the two brothers in ISU Chemical is only 0.1% and 0.05%, while their stake in ISU PETASYS stands between 0.00% and 0.07%. Ultimately, there are criticisms that, without a clear succession plan or structural refinement, it is insufficient to consider this as a system of third-generation management.
◇ Challenges include improving performance and responsible management... Experts say "Shareholder trust undermined"
Another challenge ISU Group faces is poor performance and insufficient responsible management.
Since 2022, ISU Chemical has incurred operating losses for three consecutive years, exceeding 120 billion won in deficits over three years. This is due to continued funding support to cover the shortcomings of its affiliate ISU Construction.
Lee Nam-woo, chairman of the Korea Governance Forum, noted, "The current governance structure allows the chairman to make all major decisions while evading responsibility, which is a serious issue that undermines shareholder trust."