Hyundai Group sells shares to affiliates; critics bristle

Cross-shareholding damages S.K. corporate culture, observers say

South Korea’s Hyundai Group is under fire for its alleged efforts to strengthen the grip on its affiliates through cross-shareholding, a practice many foreign corporations and economic experts criticize as something that should be eliminated in order to improve the nation’s corporate governance.

On Tuesday, Hyundai Elevator Co., Hyundai Group’s de-facto holding company, said that it sold 12.07 percent of its own stock to Hyundai Logistics Co., an unlisted Hyundai affiliate.

The company also sold its 18.7 percent stake in Hyundai Logistics to Hyundai Merchant Marine Co., bringing the shipping company’s stake in the logistics firm to 48.78 percent.

Critics argue that this web-like, murky cross-shareholding is the first thing that needs to be curbed in order to establish an advanced level of corporate governance in South Korea.

Hyun Jung-enu, chairwoman of the Hyundai Group, holds only 1.67 percent and 3.92 percent stake in Hyundai Merchant and Hyundai Elevator, respectively, with no stake in Hyundai Logistics. She has been suspected of having stepped up the drive to maintain control over the group’s affiliate companies, especially Hyundai Merchant Marine, which has recently been targeted by takeover attempts.

Hyundai Group said that its recent stock trades are part of an effort to raise funds needed to purchase Hyundai Engineering and Construction Co., which is now on the selling block after years of being saddled with debt.

However, some market experts said the stock sales were intended to defend Hyundai Group’s managerial power over affiliates, and to protect them from unsolicited hostile takeover bids.