Korean Air to Sell Songhyeon-dong Site and Wangsang Leisure... Cho Won-tae's 'Financial Improvement' Move (Update)

KCGI "Belated Management Improvement Plan... Lacks Sincerity"

On the 6th, when the Korean Air board meeting was held, a sense of silence prevailed at the Korean Air Seosomun building in Seoul. Photo by Moon Honam munonam@

[Asia Economy Reporter Yoo Je-hoon] Cho Won-tae, chairman of Hanjin Group, has decided to strengthen the independence of Korean Air's board of directors and proceed with the sale of the idle hotel site in Songhyeon-dong, Jongno-gu, in response to the offensive from the 'anti-Cho Won-tae coalition.'

KCGI, a private equity fund representing the anti-Cho Won-tae coalition, also pressured Chairman Cho, saying, "It is difficult to give sincerity or credibility to the belated management improvement plan." As the Hanjin KAL shareholders' meeting scheduled for next month approaches, the two sides are intensifying their public opinion battle against each other.

Korean Air held a board meeting on the morning of the 6th at the KAL Building in Jung-gu, Seoul, and approved the management improvement plan containing these details. Chairman Cho attended the board meeting via video connection because he boarded a special charter flight to transport Korean residents from Wuhan, China, and then entered a 14-day self-quarantine.

Earlier, as Cho Won-tae, former Korean Air Vice President Cho Hyun-ah, KCGI, and Bando Construction began a management rights dispute through a joint shareholding agreement, Korean Air and Hanjin KAL held board meetings over two days starting from this day to discuss management improvement plans and governance improvement plans. On the 7th, another board meeting is scheduled to discuss governance improvements for Hanjin KAL.

Korean Air first decided to sell the Songhyeon-dong site, which remained idle after the traditional Korean house hotel construction plan was canceled, and Wangsang Leisure Development Co., Ltd., which has low business feasibility. The funds generated from the sale will be used to improve the financial structure. Korean Air's debt ratio, which approached 922% at the end of the third quarter last year, has been a continuous concern raised by KCGI.

Measures to strengthen board independence and transparency in governance were also prepared. Korean Air decided to compose all members of the Outside Director Candidate Recommendation Committee as outside directors to strengthen its independence. Accordingly, Inside Director Woo Ki-hong resigned from the committee, and Outside Director Kim Dong-jae was newly appointed as a member.

The establishment of a Governance Committee to enhance governance transparency was also approved. The Governance Committee will pre-review major company matters that affect shareholder value and rights. This Governance Committee is also composed entirely of outside directors, with Outside Director Kim Dong-jae appointed as chairman.

Meanwhile, the anti-Cho Won-tae coalition threw a check at this improvement plan. KCGI, through its statement on the 'Joint Shareholding Agreement on Hanjin KAL Shares' released on the morning of the same day, pointed out, "They may come up with another temporary measure ahead of this year's shareholders' meeting, but issuing something solely to maintain their position without genuine will or effort for improvement cannot be a fundamental solution to the problem."

KCGI emphasized, "This joint shareholding agreement is the first step to transform the existing management system, which operates Hanjin Group as the private property of a specific individual without vision or capability, into a professional management system to achieve governance improvement. It is desirable for professional managers, along with internal and external experts, to work together to lead the company in a proper direction, and for shareholders to monitor and check the management activities of directors, which constitutes a desirable corporate governance."

This content was produced with the assistance of AI translation services.