Korea & Company Rejects Proposal to Appoint Cho Hyun-sik as Audit Committee Member... Steps Toward 'Conflict Reignition'

Scheduled Vote Battle at General Meeting Through Shareholder Proposal
Business Community Points Out "Realization of Management Dispute Measures Such as Separate Election of Audit Committee Members and 3% Rule"

[Asia Economy Reporter Ki-min Lee] The conflict within the Korean Tire family, embroiled in a sibling management rights dispute, has entered a phase of renewed tension. This follows the board of directors' rejection of the eldest son, Cho Hyun-sik, CEO of Hankook & Company (the new name for the Hankook Tire & Technology Group), stepping down as CEO and the proposal to appoint an outside director and audit committee member. However, since CEO Cho has already submitted a shareholder proposal, the matter is expected to be presented at the shareholders' meeting. Both inside and outside the business community, including Hankook & Company, there are reactions of surprise at CEO Cho's shareholder proposal, alongside criticism that the separate appointment system for audit committee members has become a tool for management disputes.

On the 25th, Hankook & Company held a board meeting and did not adopt the proposal to appoint Professor Lee Han-sang of Korea University as an outside director and audit committee member, which CEO Cho had requested to be included on the shareholders' meeting agenda. The day before, CEO Cho had publicly released a shareholder letter stating that he would complete the procedure to be appointed as an outside director and audit committee member and then resign as CEO. It is also known that CEO Cho, along with his sister Cho Hee-kyung, Chairwoman of the Hankook Tire Sharing Foundation, submitted shareholder proposals to the affiliate Hankook Tire & Technology. Accordingly, a power struggle between CEO Cho's faction and his younger brother, President Cho Hyun-beom's faction, is expected over the related agenda at the shareholders' meeting.

Hankook & Company expressed a position of surprise regarding this. The company stated, "It is surprising that the person who is both the CEO and chairman of the board, who could have resolved the issue amicably through prior consultation with the company, submitted a shareholder proposal and that the press release was distributed not by the company but through a lawyer." They also emphasized, "It is difficult to understand why a separate outside director appointment proposal was presented in opposition to the outside director appointment proposal suggested by the board." Furthermore, although CEO Cho announced his intention to resign as CEO, he did not clarify his stance on the vice-chairman position at Hankook & Company, the chairmanship of the board, or the limited guardianship trial concerning his father, Chairman Cho Yang-rae, leading the business community to view the situation as highly prone to conflict.

Regarding this, while refraining from taking a stance on the Korean Tire family dispute, insiders and outsiders in the business community expressed concern that "the 3% rule and the separate appointment of audit committee members have become tools for management disputes," and there is a growing apprehension that attempts to use these mechanisms in management disputes will sharply increase in the future. A shareholder proposal means that shareholders holding at least 3% of the total issued shares, excluding non-voting shares, can propose certain matters in writing to be included as agenda items for the shareholders' meeting at least six weeks before the meeting. Since the revision of the Commercial Act last year, the six-month holding period restriction for submitting shareholder proposals has been removed. Additionally, when electing audit committee members who also serve as outside directors, the 3% voting rights restriction applies individually without aggregating the shares of the largest shareholder and related parties. A business community official said, "While shareholder proposals under the 3% rule and the separate appointment system for audit committee members are not illegal or unlawful, they could increase corporate management confusion and cause general shareholders to feel uneasy," adding, "There is a very high possibility that similar incidents will occur in other companies in the future." On the 24th, the day CEO Cho's shareholder letter was made public, Hankook & Company's stock price plunged 19.20%.

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