As Youngone Group, a corporations specializing in textile and fashion manufacturing and exports, comes under a prosecutors' investigation on suspicion of omitting affiliate data, corporate governance risk is coming to the fore. As this comes at a time when the group had continued its growth on the popularity of brands such as The North Face, analysts say the stability of the second-generation management system centered on Vice Chair Sung Rae Eun is being put to the test.
According to related industries on the 25th, the Korea Fair Trade Commission (FTC) recently referred Youngone Group Chair Sung Ki Hak to prosecutors. While submitting the materials required for designating the public disclosure target corporate group (large corporate group) for 2021–2023, Chair Sung omitted a total of 82 affiliated companies (excluding duplicates), resulting in not being subject to large-corporation regulations. Both the period and the scale of the omissions are the largest ever among cases in which the Korea Fair Trade Commission (FTC) uncovered false submissions. Youngone Group's asset exceeded the 5 trillion won threshold for designation as a large corporate group, but it avoided designation by submitting the omissions.
By avoiding disclosures and other regulations that come with large-corporation designation, Youngone Group's succession process did not become sufficiently visible externally. In 2023, Chair Sung gifted more than 50% of the equity in YMSA to his second daughter, Vice Chair Sung Rae Eun; YMSA is the largest shareholder, holding 29.09% equity in the holding company Youngone Holdings. As the de facto controlling company of the group, that equity transfer was the core of the succession work.
In the meantime, Youngone Group secured major global sports outdoor brands, including The North Face, Lululemon, and Patagonia, as key clients and sustained stable growth. The expansion of OEM (original equipment manufacturer) and ODM (original design manufacturer) orders, coupled with the streamlining of overseas production bases, drove improvements in performance and the scale of the corporations, and the second-generation management system centered on Vice Chair Sung Rae Eun appeared to be taking hold naturally.
However, with the referral to prosecutors raising Chair Sung's legal risk, a reassessment of the independence of the second-generation management system and the stability of corporate governance has become unavoidable. Although the succession centered on Vice Chair Sung Rae Eun has been completed, it is still known that the founder, Chair Sung, has exercised influence over key decision-making. Observers say this development could be a watershed in gauging the substantive stand-alone leadership of the Sung Rae Eun system.
The company's performance is on a rebound. While the slump of the high-end bicycle brand Scott had weighed on results for a time, strength in the core OEM business led to improvement. According to financial data firm FnGuide, last year's revenue and operating profit forecasts for Youngone Corp. were tallied at 4.0068 trillion won and 480.5 billion won, up 13.9% and 52.3% from a year earlier, respectively.
Inside and outside the industry, the view is that while the impact of the legal risk on immediate results may be limited, a hit to external trust could burden medium- to long-term management. In particular, because global brands use corporate governance transparency and compliance management as important evaluation criteria when selecting partners, some analysts say this could become a variable in future transaction relationships.
Meanwhile, Youngone Group is maintaining a cautious stance on the matter. On the 24th, after attending a policy forum on the fashion industry at the National Assembly, Vice Chair Sung Rae Eun met with reporters and said, "We will faithfully cooperate with the investigation," keeping further comments to a minimum. A Youngone Holdings official said, "It was an administrative mistake, and there was absolutely no intentional concealment or other motive," adding, "We are working on improving internal processes to prevent a recurrence."