Pharmaceutical Family Dispute Escalates

A family feud over Dong-A Pharmaceutical (Pham) managerial rights is escalating after CEO Kang Shin-ho officially refused the request of his second son, a representative of Soo Seok Trading, to participate in corporate management.

The second son, Kang Moon-seok, is not accepting Dong-A’s decision and is considering legal measures, indicating a possible legal battle between father and son over managerial rights.

Dong-A held a board of directors’ meeting on February 22 and announced that it would not accept second son Kang’s proposal of appointing ten director candidates, including Kang himself. The proposal is the equivalent of a son’s demand for management rights. But the son, who once stepped down from a Pham vice chairmanship post due to mismanagement, is facing opposition because the proposal goes against the company’s sustainable development. Another red flag is that the recommended director candidates do not seem to be qualified enough.

Second son Kang presented ten director candidates including himself in the form of a director proposal on January 31, and strongly requested management rights.

On January 25, the chairman and second son Kang talked each other and hugged, showing signs of a thaw between the two factions.

But industry experts worry about a deeper conflict between them, though they have so far avoided a battle to gain more votes among general stockholders.

Chairman Kang said, “I will not serve as a managerial director.” indicating his resignation from representative director duties. He added, “The feud started from a lack of transparency and trust. I hope my son will agree with me someday.”

But the son disagreed. “The worst has come,” he said.

Pham strongly blames the former vice chairman’s mismanagement for problems when he worked for Dong-A.

Dong-A said, “The former vice chairman had expanded business to unrelated fields like intermediary trade to exaggerate his performance and inflicted a 20 billion won loss on the company.” While he continued to hold his job as an auditor of Yongma Logis, he sold Soo Seok Trading’s shares at a higher price than the evaluated price, damaging the pharmaceutical company. He lost up to 85.3 billion won in excessive investments and support from affiliates from 2000 to 2004.

He joined Pham in 1987 and served as vice chairman for two years starting in 2003. He resigned from the post in March 2005 after disputes with his father over management principles.

Regarding Dong-A’s recent decision, the son said, “The worst has come. A responsible company never prevents directors from exercising their rights.”

An official at Soo Seok Trading said, “We do not know the official position of Dong-A. Legal action, such as proposing a temporary disposition at the general meeting as an agenda, is under consideration.”