SK Innovation at a Crossroads of a 'Major Decision,' Board of Directors Steps In Directly (Comprehensive)

US President's ITC Decision Veto One Month Away... Compensation Negotiations Still Disagree
Board of Directors, the Top Decision-Making Body, Strongly Criticizes "Lack of Global Dispute Experience Leading to Poor Response"
Orders Establishment of Global-Level Compliance System
"Current Compensation Demands from LG Energy Solution Deemed Unacceptable Due to Concerns of Breach of Fiduciary Duty" Position Clarified

[Asia Economy Reporters Hyewon Kim and Yoonju Hwang] SK Innovation stands at a critical decision-making crossroads regarding the ongoing battery trade secret infringement dispute with LG Energy Solution in the United States. The SK Innovation board of directors has begun organizing its stance on the lawsuit and business perspectives in response to the final decision by the U.S. International Trade Commission (ITC). The fate of SK Innovation's battery business in the U.S. is expected to be determined by President Joe Biden's potential veto of the ITC decision, which is just a month away, and whether a settlement on damages with LG Energy Solution is reached.

On the 11th, SK Innovation announced that on the 10th, it held an expanded audit committee meeting attended by all outside directors to independently conduct an in-depth review of the matter. The audit committee, an independent audit body within the board led by Professor Woo-seok Choi of Korea University Business School as the chief audit officer, holds final decision-making authority alongside the board on major management issues. It has initiated measures to prevent recurrence of similar situations such as the battery lawsuit.

Why Has SK Innovation’s Board, Holding Final Decision-Making Authority, Accelerated Its Actions?

The direct involvement of SK Innovation’s board, the ultimate decision-making body on major management issues, in overseeing the battery trade secret infringement lawsuit against LG Energy Solution at the U.S. ITC signifies that the company is at a critical juncture for business decisions. With the deadline for President Joe Biden’s veto of the ITC final decision approaching in a month, the board has accelerated its actions by beginning a thorough review of the negotiation terms between SK Innovation and LG Energy Solution.

At the expanded audit committee meeting held the previous day, there was strong criticism regarding inadequate responses to the U.S. judicial procedures and calls for establishing a global-level compliance monitoring system. The board also took a stance rejecting any unreasonable compensation payments to LG Energy Solution, warning that such payments could constitute breach of fiduciary duty.

The board has ordered an internal overhaul of the global litigation response system, using this incident as a lesson, and plans to appoint external global experts to establish a multi-layered, flawless compliance monitoring system. The board strongly criticized the insufficient handling of U.S. judicial procedures due to a lack of global dispute experience. Accordingly, SK Innovation intends to appoint external experts in global compliance in the U.S. as soon as possible to enhance its compliance monitoring system.

Chief Audit Officer Woo-seok Choi of SK Innovation’s board stated, "It is very regrettable that we lost the case due to inadequate response to U.S. judicial procedures without even having the opportunity to defend against the core issue of trade secret infringement. At a time when SK Innovation must further expand its global business, strengthening the compliance system beyond global standards is an urgent and critical task."

Careful Deliberation on Critical Decisions Depending on Biden’s Veto and Compensation Settlement

SK Innovation’s board appears to be carefully considering various possibilities, including whether the U.S. president will exercise the veto power over the ITC final decision and the compensation demands from LG Energy Solution. The board also received a report on recent negotiation developments, including new terms proposed by SK Innovation and LG Energy Solution’s responses. The audit committee stated, "While the board will closely examine the competitor’s demands, any conditions that effectively render SK Innovation’s battery business in the U.S. unsustainable or significantly diminish its competitiveness will be unacceptable."

If the compensation demanded by LG Energy Solution does not meet the board’s acceptable threshold or is judged to undermine the battery business in the U.S., it is interpreted as a possibility that SK Innovation might consider withdrawing from the U.S. market as a worst-case scenario. In fact, LG Energy Solution and SK Innovation have attempted to reach a settlement after the ITC final decision but have yet to narrow their differences. LG Energy Solution is reportedly demanding compensation in the range of 3 trillion KRW, while SK Innovation claims it should be less than 1 trillion KRW.

The SK Innovation board has also begun a detailed assessment of its battery business capabilities. To conduct further review of key issues, board members plan to visit the Daedeok Battery Research Institute and other sites soon, and prepare a position statement and fundamental improvement plans related to the U.S. ITC lawsuit response.

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