Jo Won-tae Secures Control Over Seung-gi... What Will Be the National Pension Fund's Choice?

ISS·KCGS Recommend Support for Jo Won-tae's Reappointment
Most Oppose Candidates from the Three-Party Alliance and Recommend Abstaining from Voting Rights

[Image source=Yonhap News]

[Asia Economy Reporter Yu Je-hoon] Cho Won-tae, Chairman of Hanjin Group, appears to have gained the upper hand in the management rights dispute with the shareholder coalition (known as the '3-party coalition') aimed at normalizing Hanjin Group. This comes as major domestic and international proxy advisory firms have been recommending support for Chairman Cho's reappointment as an inside director. Among them, the business community is paying close attention to the choice of the National Pension Service (NPS), which is known to hold about 2.9% of Hanjin KAL shares. This is because the advisory firms providing proxy advisory services to the NPS have sided with Chairman Cho.

According to the business community on the 16th, ISS, the world's largest proxy advisory firm, recently recommended a vote in favor of Chairman Cho's reappointment as an inside director of Hanjin KAL in its shareholder meeting agenda analysis report sent to its members. ISS judged the appropriate size of Hanjin KAL's board to be between 6 and 10 members. Accordingly, ISS recommended support not only for Chairman Cho but also for candidate Ha Eun-yong (Vice President of Finance at Korean Air) among the inside director candidates, and expressed support for three of the five inside director candidates: Kim Seok-dong, Park Young-seok, and Choi Yoon-hee.

On the other hand, ISS recommended opposition to six of the seven candidates from the 3-party coalition, which consists of former Korean Air Vice President Cho Hyun-ah, private equity fund KCGI, and Bando Construction. Only Kim Shin-bae, an inside director candidate from the 3-party coalition and former SK Vice Chairman, received a recommendation for support, citing his past experience in management and as an outside director at other companies as potentially helpful.

Korea Corporate Governance Service (KCGS), the largest domestic proxy advisory institution and an advisor to the National Pension Service, reached a similar conclusion. KCGS expressed support for all seven Hanjin KAL candidates including Chairman Cho, while recommending 'non-exercise of voting rights' for all seven candidates from the shareholder coalition.

Generally, the guidelines of proxy advisory firms significantly influence the voting behavior of institutional investors, foreign investors, and minority shareholders who find it difficult to make specific judgments on each agenda item at company shareholder meetings. In fact, the late Chairman Cho Yang-ho received an opposition recommendation from ISS last year on his reappointment as an inside director and subsequently lost management rights at the shareholder meeting.

The fact that two leading domestic and international advisory firms reached similar conclusions indicates considerable damage to the legitimacy of the 3-party coalition. Although they have fully promoted the professional management system, many candidates have been evaluated as lacking 'aviation expertise,' and their governance improvement efforts have been continuously criticized due to the heterogeneous combination of KCGI, former Vice President Cho, and Bando Construction. KCGS also pointed out in its report that "Former Vice President Cho was involved in the 'nut rage' incident, which KCGI identified as a problem stemming from Hanjin Group's backward governance, and neither former Vice President Cho nor Bando Construction had previously pointed out governance issues before forming the 3-party coalition," adding that "it is unclear whether the other parties genuinely agree with the changes KCGI pursues."

A financial investment industry official said, "It is true that the legitimacy of KCGI has been considerably diminished by joining forces with former Vice President Cho," adding, "While the situation may change after entering a long-term battle, at this point, it does not seem easy for the National Pension Service to side with the 3-party coalition."

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