Park Cheol-wan Kumho Petrochemical Executive Director, Moves to Win Board Member Replacement Votes?

Executive Director Park Cheol-wan Demands 7.3-Fold Dividend Increase from Kumho Petrochemical
Strong Performance Last Year Despite COVID-19
Kumho Petrochemical "Difficult Due to Industry Characteristics"

Park Cheol-wan, Executive Director at Kumho Petrochemical

[Asia Economy Reporter Hwang Yoon-joo] Park Cheol-wan, executive director who is in a management dispute with his uncle Park Chan-gu, chairman of Kumho Petrochemical, has demanded a 7.3-fold increase in dividends ahead of the March shareholders' meeting. Kumho Petrochemical agrees with shareholder-friendly policies but finds such a demand difficult to accept considering the characteristics of the petrochemical industry. The securities industry and business circles interpret Park's shareholder proposal as a strategic move to rally votes for replacing the board of directors at the shareholders' meeting.

According to the industry on the 3rd, Kumho Petrochemical plans to hold a board meeting next month to discuss the agenda for the shareholders' meeting, including the contents of Park's shareholder letter.

Earlier, Park sent a shareholder letter to Kumho Petrochemical requesting an increase in dividends from 1,500 KRW to 11,000 KRW per common share and from 1,550 KRW to 11,100 KRW per preferred share, along with the replacement of the board members. Despite the impact of the COVID-19 pandemic last year, Kumho Petrochemical recorded strong performance. The securities industry estimates Kumho Petrochemical's operating profit last year at 724.6 billion KRW, a 97.1% increase compared to the previous year. This is the background for Park's demand for dividend expansion.

The industry interprets Park's proposal as an attempt to secure votes for replacing the board at the March shareholders' meeting. A securities industry official said, "The petrochemical industry is a typical cyclical sector, so if market conditions are unfavorable, it is impossible to maintain the dividend capacity demanded by Park's side," adding, "It means asking individual investors to vote for the board replacement agenda when the shareholders' meeting is held."

Kumho Petrochemical has five directors whose terms expire this year, including one inside director and four outside directors. Park has requested the appointment of five members, including himself, to the board. Kumho Petrochemical's board consists of 10 members: three inside directors and seven outside directors. The inside directors are Chairman Park, CEO Moon Dong-jun of Kumho Petrochemical, and CEO Shin Woo-sung of Kumho P&B Chemicals. CEO Moon's term expires this year, and Chairman Park's and CEO Shin's terms expire next year. If all five members are replaced as Park demands this year, Park will effectively be able to participate in management.

A Kumho Petrochemical official said, "Due to the nature of the capital-intensive industry, it is difficult to distribute all net profits as dividends like in the IT industry because reinvestment, debt ratio stabilization, and cash reserves for downturns must be prepared," adding, "We are reviewing various shareholder-friendly policies."

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