[2020 National Audit] Rep. Kim Eun-hye: "Korea Expressway Corporation Acts as a Rubber Stamp for Capital-Deficit Subsidiaries"

[Asia Economy Reporter Yoo In-ho] It has been revealed that Korea Expressway Corporation unanimously approved all agenda items at the shareholders' meetings of companies in which it owns shares that have fallen into complete capital erosion.

According to Kim Eun-hye, a member of the National Assembly Land, Infrastructure and Transport Committee from the People Power Party, despite the fact that ‘Busan-Ulsan Expressway Co., Ltd.’, ‘Seoul-Chuncheon Expressway Co., Ltd.’, and ‘Seoul Northern Expressway Co., Ltd.’, in which Korea Expressway Corporation holds shares, are in a state of complete capital erosion, all 28 shareholders' meetings held over the past three years unanimously approved agenda items such as business plans, settlements, and approval of financial statements.

Currently, there are three private expressways in which Korea Expressway Corporation holds voting rights. It holds 51% of the shares in Busan-Ulsan Expressway Co., Ltd., 10% in Seoul-Chuncheon Expressway Co., Ltd., and 10% in Seoul Northern Expressway Co., Ltd.

As of 2019, their net income was in deficit: Busan-Ulsan Expressway Co., Ltd. recorded a loss of 10.488 billion KRW, Seoul-Chuncheon Expressway Co., Ltd. a loss of 16.088 billion KRW, and Seoul Northern Expressway Co., Ltd. a loss of 61.63 billion KRW.

Looking at their equity status, Kim’s office explained that it can be seen that they have entered a state of complete capital erosion beyond a simple net income deficit. Complete capital erosion is defined as a situation where total liabilities exceed assets, and these companies are currently in such a state.

Despite this situation, Korea Expressway Corporation only requested management improvements a few times at the shareholders' meetings of Busan-Ulsan Expressway Co., Ltd., but unanimously approved all agenda items presented at the meetings.

The problem is that the voting rights exercised at the shareholders' meetings of all companies in which Korea Expressway Corporation holds shares, not just these expressways, were in favor. It was revealed that in most shareholders' meetings, voting rights were exercised in writing without actual attendance.

Assemblywoman Kim said, “If Korea Expressway Corporation does not actively demand management improvements from these companies, the structure will inevitably lead to an increase in the amount of public tax compensation.” She added, “Given the nature of private expressways that recover income through toll collection from the public, Korea Expressway Corporation, as the investing entity, has a responsibility to take a more proactive role in management improvement.”

She further urged, “A responsible attitude as a shareholder is required to prevent moral hazard and to improve transparent management structures.”

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