Trouble At Scott Sports HQ, CEO Beat Zaugg Replaced... Or Not. Police Called.

it's been an exciting week in the boardroom of Frieburg based Scott Sports. 

This Wednesday afternoon, several police vehicles were seen at the entrance to the Scott Sports building in Givisiez. “Nothing serious happened. We intervened in a civil matter, a dispute between managers. In this type of case, the police are called to the scene to find a way to open a discussion, and for people to understand each other. But there are no injured or anyone arrested,” insisted the Friborg police.

The trouble seems to have arisen when the Scott Sports Board of Directors replaced CEO Beat Zaugg "to refresh Scott's development to become a world-class manufacturer in bikes and other outdoor sport categories."

Juwon Kim, a Scott Corp. Board of Directors member since 2022 will apparently succeed Zaugg. Kim has 17 years of experience in investment banking with various international banks. He was the co-founder of a start-up venture in Korea before joining Scott Corp. majority shareholder Youngone as head of growth strategy and mergers and acquisitions.

Kim will be advised by Steve Meineke and Mathias Seidler, who have executive experience in the bicycle and outdoor gear industry.

However, on Monday, April 1, Zaugg, who has been an major shareholder of Scott Sports since 1998, said that he remains the brand’s CEO, a minority shareholder and chairman of its parent company board, despite the Friday’s press release announcing his dismissal.

“This announcement was made to destabilize the company and its employees,” he said, claiming that the dispute arose from a “culture clash” between Youngone and the company.

The [SIN hope's you're following this....] Youngone's PR firm issued a further statement from the Scott Corporation board insisting that Youngone representatives have a majority on the board and had voted to terminate Zaugg.

“We understand that it may be difficult for Mr. Zaugg to accept his termination (given his long-standing role as CEO). But this is ultimately irrelevant as a matter of law: the ultimate decision body of a company is the board of directors and the board is clearly entitled to terminate the employment with the CEO,” the statement read in part.

The statement said that a majority of the board “have resolved to terminate Mr. Zaugg as CEO with immediate effect and that termination has been duly notified to Mr. Zaugg last week. As you will understand the reasons that led to this termination cannot be disclosed at this stage.”

Zaugg 's position is that the board did not terminate him correctly.

“So far they did it wrong. This has to be my secret for the time being,” he said.

The move comes after Youngone, a South Korean apparel brand that acquired a majority share in Scott Sports in 2015 from Zaugg, recently loaned its subsidiary 150 million Swiss francs ($166 million).

Youngone expressed confidence in the existing management and employees, according to a Scott Sports news release. "Their commitment and professionalism will significantly benefit the company during this transition phase." Also according to the release, "The board of directors of Scott emphasizes that the long-standing commitment of majority shareholder Youngone to Scott remains central and is not called into question."

Kihak Sung, Youngone chairman and a member of Scott Corporation's board, added, "Youngone has been a strong partner and long-term shareholder of Scott. We firmly believe in Scott, its state-of-the-art products, as well as the dedication and quality of its employees. With this change, Scott will strive to gain growth and market share in the future, leaving behind the current crisis in the industry."

In a filing with South Korean financial regulators, Youngone said it made the investment in the form of a 4.6% loan at the end of 2023.

Youngone is a supplier to brands including Patagonia, adidas, Lululemon, Outdoor Research, and The North Face, with factories in Korea, Bangladesh, China, Vietnam, and Thailand. It also is a majority share owner of Outdoor Research. It acquired a 20% share in Scott in 2013 and expanded it to 50.01% in 2015.

Scott Sports was founded by Ed Scott in as a ski industry supplier in 1958 in Sun Valley, Idaho. The brand later entered the motocross and bicycle markets. In 1993 the company sold 55% of its shares to Zell Chillmark Chicago’s Investment Fund (the fund had acquired Schwinn the previous year). In 1998, Zaugg was part of a management buyout of Scott with then-chairman Tom Stendhal and other managers.