The nasty succession battle exemplifies the opaque nature of chaebols, experts say.
"At times like this, it's of paramount importance to have transparent rules and procedures and rational norms of succession. In that sense, the perceptions and actions of the chaebol families are astonishingly out of touch," noted a recent editorial in daily newspaper The Hankyoreh.
Families running chaebols control a vast network of companies through a circular holding structure and their control rights typically exceed cash-flow rights, giving them the final say on corporate decisions. Negative consequences of the system include mandatory support of distressed subsidiary firms, excessive concentration of power within a small group and inheritance of the controlling shareholder position by heirs that may not be qualified to effectively shape a company's future.
Other well-known chaebols include Hyundai, Daewoo and LG.
Asia's fourth-largest economy is no stranger to controversial family dynasties. In July, Samsung C&T and Cheil Industries agreed on a deal that would consolidate the Lee family's power over Samsung Electronics, sparking the ire of activist shareholder Paul Singer, CEO of U.S. hedge fund Elliott Associates, who said the deal undervalued Samsung C&T while overvaluing Cheil.
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The chaebol structure also has a broader economic impact.
The tight control exercised by family owners is a hindrance to the liberalization of South Korea's services sector, which should be the economy's next leg of growth, Barclays economist Wai Ho Leung told CNBC, adding that the entire sector remains insular and domestic-oriented.
An editorial in The Korea Times on Tuesday said the Lotte scandal offered South Korean President Park Geun-hye the perfect chance to toughen corporate laws, including replacing owners' arbitrary decisions with legal institutions and setting stricter limits on cross-shareholding.
"At stake is not the image and performance of a single group, but the reputation of entire Korea Inc. That is why the ongoing succession scandal can be a blessing in disguise―depending on how Seoul deals with it."
However, no major changes are expected.
"There has been talk that the Samsung C&T and Cheil Industries deal would push people to think that chaebols shouldn't have such a big hold, but I don't see it easing unless the government needs to break them up for various reasons, which may happen in future," Port Shelter Investment chief executive Richard Harris told CNBC in July.
"Investors know that and will continue to consider it when investing in South Korea."