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Hanjin Group Chairman Cho Yang-ho
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Battle of votes in general meeting of holding company’s shareholders inevitable
Institutional Shareholder Services (ISS), the world’s largest proxy advisory firm, has recommended that stockholders at Hanjin KAL vote against the reappointment of Suk Tae-soo as company president. Considering that activist hedge fund Korea Corporate Governance Improvement (KCGI), which is the company’s second largest stockholder with a 12.01% share, is determined to prevent Suk’s reappointment, the battle lines have been drawn for the vote during the general meeting of stockholders on Mar. 29. Sources at Hanjin KAL and in the investment industry told the Hankyoreh on Mar. 21 that ISS voiced its opposition to the motion to reappoint Suk in an advisory report on Hanjin KAL that was recently sent to member companies. ISS bases its opposition on the fact that Suk is partly to blame for the embezzlement and breach of trust that Hanjin Group Chairman Cho Yang-ho allegedly committed, since he violated his duty to be a cautious and conscientious manager. Though the courts haven’t made their final decision about Cho, ISS noted, the seriousness of the charges against him raise concerns about an “egregious” management structure. ISS also objected to a recent motion to reappoint Cho to the board of directors at Korean Air because of serious concerns about Cho’s character given the several charges the prosecutors have filed against him. And so there’s sure to be a sharp conflict in the vote over Suk’s reappointment in the general meeting of stockholders. Since the appointment of directors at Hanjin-KAL is treated as an ordinary motion, it needs a majority of votes by attending stockholders to pass. 28.93% of stock at Hanjin KAL is held by Cho and his allies, while the second and third largest stockholders are KCGI with 12.01% and South Korea’s national pension fund with 6.7%. The big question is how the institutional investors and small stockholders who control the other 53% of the stock will vote. A substantial number of these institutional investors are among the 1,700 companies that are members of ISS. Regarded as one of Cho’s closest associates, Suk has held a wide range of senior positions at Korean Air since joining the company in 1984, including head of the company’s management strategy team, head of its management strategy office and head of its American office. In 2013, he was appointed president of Hanjin Shipping, and in 2016 he was involved in liquidating the company as its legal receiver in lieu of Cho. Last year, he was appointed vice chairman of Korean Air. On the other hand, ISS expressed its support for the new outside directors recommended by the Hanjin KAL board and its opposition for all the outside directors proposed by KCGI. KCGI submitted a motion to appoint Cho Jae-ho, a professor at Seoul National University, and Kim Yeong-min, an attorney, as outside directors. This motion won’t be considered at the general meeting of stockholders, however, because the Seoul High Court ruled on Mar. 21 that KCGI isn’t qualified to submit a stockholder motion. The outside directors recommended by Hanjin KAL are Ju In-gi, a director at the International Federation of Accountants; Shin Seong-hwan, a business professor at Hongik University and former director of the Korea Institute of Finance; and Ju Sun-sik, a former standing director at the Fair Trade Commission. By Shin Min-jung, staff reporter Please direct comments or questions to [english@hani.co.kr]
