Back in 2000, Shin Chang-jae, the then newly-appointed chief executive of Kyobo Life Insurance, was delivering a speech to about 500 staff when a live news broadcast interrupted his speech with an announcement that the company had filed for bankruptcy.
The broadcaster said South Korea’s financial regulators decided to close down the business because there was no chance of recovery. Kyobo’s branches nationwide were being swamped with calls of complaints from customers in response to the news, the anchor added.
The company’s auditorium, where the staff were gathering for a strategy meeting, quickly fell into silence, with most of them looking shell-shocked. Some sobbed. Soon, the fear and confusion turned into relief, however, as employees found out the announcement was staged by their boss.
Mr Shin, now 62 years old, insists that the extreme and unsettling tactic was necessary to make his staff brace for a tough restructuring.
“When I took over, the company was already big but it was in a perilous financial situation. Still, people did not believe that it could fail,” he recalls at the company’s headquarters in downtown Seoul. “Something radical was needed to instil a sense of crisis among the employees, to bring about changes.”
Mr Shin, the eldest son of Kyobo’s founder Shin Yong-ho, reluctantly took the helm of the privately-held family business not long after delivering a last baby as an obstetrician.
Most other heirs of South Korea’s big family-run business groups — such as Lee Jae-yong, the scion of Samsung Group — have beengroomed from an early age to become top managers. Mr Shin, however, had never imagined being a businessman before his father was diagnosed with cancer in 1993. He was an established obstetrician and a medical professor at the country’s top university for about 10 years.
“Business management was something completely new to me, so I had to agonise over the idea of becoming a student again from a professor,” he recalls.
But the magnitude of his challenge made the middle-aged man a quick learner as he took the helm of Kyobo in the aftermath of the Asian financial crisis. The company suffered a Won254bn (£142m) net loss in 2000 as it had to write off Won2.4tn of assets after the crisis damaged its investment portfolio.
Competition was severe in the crowded market, with dozens of players chasing new contracts to boost sales. South Koreans are obsessed with life insurance, and more than 80 per cent of them are covered by a life insurance policy because of the country’s weak social safety net. But the industry’s long practice of pursuing revenue growth at the expense of existing customer protection looked irrational to the newcomer. So he has switched the company’s focus to customer satisfaction, profitability and risk control. “In hindsight, my ignorance of the industry was a blessing,” he reflects. “Sales were increasing but the company was actually making losses. The old practices had to go.”
The soft-spoken CEO has also turned a wilfully blind eye to corporate Korea’s traditional enforcement of strict hierarchy, with employees often feeling unable to question their superiors’ decisions. “Don’t come to a meeting if you’re not gonna speak,” he declared, when he found out his staff were just taking notes. On one wall of the conference room chosen for our interview, a cartoon of the Smurfs encourages more naysayers to come forward, with a title saying “We support Grouchy Smurf”.
His management style promoting active communication stands out in Korea’s rigid corporate culture, in which the emphasis is placed on discipline and hierarchy at the expense of encouraging creativity. Mr Shin asks his employees to focus on the company’s stated business goals instead of his own pronouncements — a contrast with groups such as Samsung and Hyundai, where chairmen are revered as demigods and their words strictly followed by employees.
He attributes the imperial chaebol style of management to a lack of clear vision. “Think of an orchestra. If there are no musical notes, they will just stare at the conductor all the time,” he says.
The pretend bankruptcy stunt was by no means his only eccentric motivation tactic. He has also sent his staff on courses that simulated their own funerals, supposedly to make them realise the intrinsic value of insurance.
Second opinion: The fellow pupil
Yoo Pil-hwa, a school contemporary and Kyobo’s outside director, remembers the young Mr Shin as an introverted, hard-working student and now sees him as a dedicated, austere but caring manager.
The business school professor says Mr Shin deserves credit for putting profit and customers first. “Kyobo should expand abroad and venture into some other financial areas, which take bold decision-making and risk-taking. However, this seems conflicting, given his risk-averse characteristics.”
Mr Shin took part in his own fake funeral in 2007, along with his 20 other executives, “to see how a family’s breadwinner feels when he leaves this world”. After writing his will, he lay down in a coffin, in traditional graveclothes, listening to a funeral march, while dirt was scattered over it. “The sound of banging nails on the coffin was really loud at night,” he recalls. “In the end, you get to think of your family and how dear it is.”
Mr Shin has gone a long way to dispel initial doubts over his management ability. He has built Kyobo, which started in 1958, into the country’s third-largest life insurer with the highest credit rating among the country’s financial companies. He has also become one of the country’s richest men, with his net worth estimated at $2.3bn.
Kyobo still runs a chain of the country’s biggest bookstores, set up by Mr Shin’s father, who stressed the importance of education and offered a policy to insure children’s education — the first such product in the global insurance industry. It became popular in the war-torn, poor country in the 1960s and 1970s.
The billionaire has however defied the reckless expansion of chaebol groups comprised of myriad unrelated businesses tied together by cross-shareholdings. Kyobo has focused on the insurance business, with brokerage and fund management units needed for its asset portfolio management.
Yet, the company’s passive stance on acquisitions has raised questions about Kyobo’s future growth, as insurance is no longer a hot industry in South Korea, given the country’s slowing economy and rapidly ageing population.
Kyobo has long been interested in expanding into the banking sector, but last year dropped out of the bidding for Woori Bank, the country’s largest lender, after sensing some opposition from financial regulators.
The decision sparked criticism that Mr Shin did not have the guts to get a big deal done. But he defends the board’s decision, saying: “We’ve always tried to avoid the so-called winner’s curse. We don’t have to jeopardise the whole group by buying something for too high [a price].”
The government plans to resume the Woori sale this year but Kyobo is considering starting an internet bank instead.
Sooner or later, Mr Shin will face the issue of who will succeed him. Not much is known about his two sons, who are in their 30s, although succession has become a buzzword in corporate Korea.
Mr Lee, Samsung’s heir, came under the spotlight recently as the group became embroiled in a heated battle with US activist fund Elliott Associates over a merger plan — subsequently approved — seen as crucial for his looming succession.
Asked if he wants to hand over Kyobo’s reins to his sons, Mr Shin, who owns a third of the company, pauses for a moment. His sons do not work for Kyobo and have no shareholdings. “This is not a small corner shop. There are too many stakeholders involved,” he smiles. “When the time comes, someone more ready and competent should take over, whether the person is my son or not.”
Culled from FT
