[Deputy Manager Column] Hanjin Kal Shareholders' Meeting and Minority Shareholders

[Asia Economy Reporter Lim Jeong-su] The Hanjin Group shareholder meeting, which will decide the fate of the management rights of Hanjin KAL, is just over a month away. The shareholding ratios between Chairman Cho Won-tae of Hanjin Group and the alliance of KCGI, Bando Construction, and Cho Hyun-ah are neck and neck. The outcome will sharply diverge depending on which side the National Pension Service and minority shareholders support. Korean Air is supporting Hanjin KAL by providing investor relations (IR) personnel, while KCGI is encouraging individual shareholders to participate in shareholder activities through its website, employing various strategies to win the votes of minority shareholders.

Chairman Cho took the lead in group management by personally presiding over the Korean Air shareholders' meeting held in March 2017 as the chair. This was right after his sudden promotion from vice president to president of Korean Air in January of that year. In 2018, he also led the Korean Air shareholders' meeting attended by his late father, former Chairman Cho Yang-ho, and Executive Director Cho Hyun-min. Despite poor performance, he won shareholders’ favor by implementing a cash dividend for the first time in seven years. Chairman Cho passed the shareholder meeting agenda smoothly without much opposition.

That year, the atmosphere at the Hanjin KAL shareholders' meeting, the group's holding company, sharply contrasted with that of Korean Air. Except for Seok Tae-soo, CEO of Hanjin KAL and right-hand man of former Chairman Cho, no members of Chairman Cho’s family or group directors (registered executives) attended. The seats marked with the names of registered executives were filled by Hanjin KAL employees, including Executive Director Lee Seong-hwan, who is in charge of finance (CFO). It was seen as a disregard for shareholders at the shareholders' meeting of Hanjin KAL, the group’s holding company.

The shareholders' meeting quickly turned into a forum for shareholder complaints. Shareholders voiced opposition to key agenda items for reasons including the insufficient dividend income received from affiliates such as Korean Air despite investments exceeding 1 trillion won in related companies, the reality that the total dividend amount remained only 7.5 billion won for a long time despite distributable profits in the hundreds of billions of won, and the proposal to raise the director remuneration limit while keeping dividends unchanged (the increase in director remuneration was proposed after Chairman Cho was promoted from vice president to president of Hanjin KAL).

The management passed the agenda with a promise that profits earned from Jin Air’s IPO would be primarily used to repay borrowings and increase Hanjin KAL’s earnings by raising stakes in affiliates such as Korean Air, and that dividends would be increased next year. The promise was fulfilled. Hanjin KAL’s short-term borrowings were reduced by half, and the total dividend amount increased more than threefold from 7.5 billion won to 24 billion won. More than 60% of net income was paid out as dividends.

After KCGI’s management rights attack, can Chairman Cho resolve the long-standing dissatisfaction of Hanjin KAL’s minority shareholders and win their hearts with the dividends temporarily raised? The Hanjin KAL shareholders' meeting is the testing ground.

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