The Formation of the Holding Company System in CJ Group and Doosan Group: Comparisons and Implications
Authors:   Asia-Europe Perspective Association, Kim Dong-Woon 
Published: June 2018

This paper explores the ways in which CJ Group and Doosan Group had established their respective holding company systems.
The holding company system has been encouraged by the Korean Government according to the Fair Trade Act since February 1999 and, until September 2011, a total of 28 major Korean chaebols, or family-dominated business conglomerates, have been transformed into the new corporate governance system to varying degrees.
As of September 2011, a total of 20 chaebols had the holding company system. The following 15 chaebols had fully-fledged systems: SK(the 3rd largest as of April 2012 among the 47 larger chaebols acknowledged by the Fair Trade Act), LG(4th), GS(8th), Hanjin(9th), Doosan(12th), LS(15th), CJ(16th), Booyoung(23rd), Hyundai Department Store(30th), Hanjin Heavy Industries(31st), Woongjin(32nd), Kolon(33rd), Hitejinro(42nd), Daesung(43rd), and Saea(44th). By conatrast, in the remaining 5 chaebols, only a small number of group companies were connected with the holding company system: Samsung(1st), Hanwha(10th), Dongbu(20th), Daehan Wire(39th) and Taegwang(46th).
CJ Group and Doosan Group, which were ranked as, respectively the 12th and 16th largest chaebol as of April 2012, have been establishing their own unique holding company system since the late 2000s and, as the result, the majority of the group companies were reorganized into the new governance system. In CJ Group, the maturity ratio of the holding company system(companies within the holding company system(as of September 2011) vs. the total group companies(as of April 2011)) was 22%(14 companies vs. 64 companies) in 2007, 86%(57 vs 66) in 2008, 93%(57 vs 61) in 2009, 89%(58 vs 65), and 60%(50 vs. 84) in 2011. Similarly in Doosan Group, the maturity ratio was 85%(22 vs. 26) in 2009, 76%(22 vs. 29) in 2010, and 84%(21 vs. 25) in 2011.
In CJ Group, a total of six events had taken place to shape the holding company system between January 2007 and November 2001.
(1) In January 2007, the new corporate governance system began to be introduced as one of the group companies, called CJ O Shopping, became a legal holding company according to the Fair Trade Act.
(2) Eight months later, in September 2007, the existing partial holding company system was transformed into a fully-fledged one as the Group's key company, called CJ Corporation, became a second legal holding company.
(3) In June 2010, CJ O Shopping acquired a company belonging to Orion Group, called On Media, which was established in 2000 and had since been acknowledged by the Fair Trade Act. On Media became a third legal holding company in CJ Group.
(4) In September 2010, CJ O Shopping was divided into two companies, CJ O Shopping and O Media Holdings (later CJ E&M), the latter of which became a fourth legal holding company following the existing three, namely CJ Corporation, CJ O Shopping, and On Media.
(5) In March 2011, CJ E&M have merged On Media and four other companies belonging to CJ Corporation. As the result of this merger, CJ E&M proved disqualified for the status as a legal holding company and so did CJ O Shopping in June 2011 due to another reason. So, as of June 2011, CJ Corporation was the only legal holding company in CJ Group.
(6) In November 2011, CJ E&M was divided into two companies, CJ E&M and CJ Games, both of which were holding companies in nature although they were not acknowledged by Fair Trade Act.