'Management Dispute' Kumho Petrochemical Faces Shareholder Vote Battle Over Dividend Increase Proposal (Comprehensive)

Park Cheol-wan, Executive Director at Kumho Petrochemical

[Asia Economy Reporters Choi Dae-yeol and Hwang Yoon-joo] Park Cheol-wan, the largest individual shareholder of Kumho Petrochemical and nephew of current Chairman Park Chan-gu, has rebutted claims that the cash dividend proposal he submitted as a shareholder proposal has procedural issues. This increases the likelihood of a direct vote showdown between Chairman Park and Executive Director Park at the shareholders' meeting scheduled for next month. Whether the proposal will be included on the agenda will be decided at the board meeting held in early next month. Although the current board is aligned with Chairman Park’s side, since the proposal was made by a major shareholder and there appear to be no procedural defects, there is no justification to exclude it from the agenda.

According to industry sources on the 22nd, Executive Director Park’s side, through legal representatives LK Partners, stated, "The company claims that the (proposal to increase dividends) is illegal, but this is not supported by the company’s articles of incorporation or the registry," and insisted that there is no problem with the proposal being included on the shareholders’ meeting agenda.

Under Article 363-2 of the Commercial Act, shareholders holding more than 3% of shares can propose agenda items for the shareholders’ meeting at least six weeks in advance. The notice of the shareholders’ meeting can include details of the agenda, and explanations can be given at the meeting itself. The board must include such proposals on the agenda unless there are special reasons. This is a mandatory obligation. Special reasons include violations of the company’s articles of incorporation, proposals that have been rejected with less than 10% approval within the past three years, personal grievances, or content that damages the reputation of specific individuals.

Park Chan-gu, Chairman of Kumho Petrochemical

Initially, the company argued that there were errors in the dividend calculation process and that the proposal violated the articles of incorporation or laws. If this were true, it would be impossible to include the proposal on the agenda. Executive Director Park’s side countered the company’s claims of legal and articles of incorporation violations (errors in dividend calculation) by stating, "Preferred stock dividends are linked to common stock dividends, so the reasons cited by the company do not justify rejecting the shareholder proposal."

The articles of incorporation only stipulate that dividends can be set according to a preferred dividend rate determined by the board within a certain range (1-20% of the par value), so there is no procedural problem. The company responded, "We have only stated that the dividend calculation errors violate the articles of incorporation and laws; we have never officially stated that the shareholder proposal has been withdrawn," adding, "If the other party corrects the errors, we will review and announce our position."

Previously, there were concerns both inside and outside the company that the proposal by Executive Director Park to significantly increase cash dividends might be difficult to include as an agenda item at the regular shareholders’ meeting. Executive Director Park proposed dividends of 11,000 KRW per common share and 11,100 KRW per preferred share, about seven times higher than last year. Reports also emerged stating that according to the company’s articles of incorporation, preferred shares should receive a differential dividend of 50 KRW, which is 1% of the par value, and that paying twice that amount, 100 KRW, would be inappropriate.

Executive Director Park has indicated that he will announce his position regarding the shareholder proposal after monitoring future developments. LK Partners stated, "As the largest individual shareholder and an executive, Executive Director Park is making a legitimate shareholder proposal to enhance corporate and shareholder value," and added, "He plans to soon disclose detailed positions and intentions regarding the shareholder proposal."

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