South Korea’s conglomerate Lotte Group will implement an organizational realignment, re-grouping its 93 affiliates into four sectors and reducing the role of its top decision-making body starting February next year. That is a follow-up measure to overhaul its murky governance structure after a succession feud between the founder’s two sons and ensuing prosecutors’ investigations on charges of embezzlement and breach of trust.

According to sources, Lotte Group’s top executives were briefed by global consultancy Mckinsey & Co. on the realignment proposal at Lotte’s policy headquarters on Tuesday. The group’s top management including chairman Shin Dong-bin, policy coordination chairman Hwang Kak-gyu and external relations head So Jin-se were said to be present in the session.

Mckinsey suggested Lotte streamline the seven units of its policy headquarters into four. It is expected to maintain the group’s essential units in charge of human resources and financial affairs, but its external relations unit for government and PR affairs will be downsized to a communication office and operational and vision strategy teams will be combined with a management innovation team.

Its management improvement team and the legal team under the group’s support function will be integrated into a new compliance management unit. Its secretary’s office will be drastically slimmed down.

With the re-organization, the current number of 300 employees at the policy headquarters would be cut in half. Mckinsey was said to propose the group slash its executives by 30 percent. Some of the employees would be re-deployed to the group’s affiliates or new functions to support each business. The group is also considering giving a new name to its policy headquarters and appointing Hwang as a leader of the new policy headquarters.

The group plans to re-classify its 93 affiliates into four business sectors -- retail, chemical, food and hotel/services, and appoint heads of each business sector. Critics inside the group, however, are said to argue that the radical reform would undermine the group’s long-term plan to introduce a holding company system.

“The final reform plan will be decided by the end of this year or early next year,” said an official from the group. This re-organization program is designed to empower the affiliates to manage business on their own as Shin emphasized.

By Son Il-seon

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