Tension Rises at Kumho Petrochemical's General Meeting Amid 'Nephew's Rebellion Round 2' Table Battle Outlook

Former Executive Director Park Cheol-wan Sends Shareholder Proposal Again This Year... Vote Battle Inevitable
Proxy Advisory Firms Split on AGM Agenda... Advisory Firms and Korea ESG Institute Support Kumho Petrochemical
KCGS Partially Supports Former Director Park's Proposal

[Asia Economy Reporter Oh Hyung-gil] Kumho Petrochemical is experiencing heightened tension ahead of its regular shareholders' meeting. Former Executive Director Park Cheol-wan has submitted a shareholder proposal demanding his appointment as an inside director again this year, following last year, challenging his uncle, Chairman Park Chan-gu. Market observers widely expect a vote showdown at the shareholders' meeting, raising concerns that the second round of the management rights dispute will reignite.

According to industry sources on the 18th, Kumho Petrochemical plans to hold its regular shareholders' meeting on the 25th, presenting agenda items including ▲approval of financial statements and profit distribution ▲appointment of outside directors ▲appointment of audit committee members ▲approval of director remuneration limits. The shareholder proposal submitted by former Executive Director Park will also be included among the agenda items. In a statement last month, Park said, "I will return as a manager with the foresight to create future growth engines and contribute to enhancing shareholder value."

Former Executive Director Park is the eldest son of the late Park Jeong-gu, the second elder brother of Chairman Park and former Kumho Group chairman. He currently holds 8.5% of Kumho Petrochemical shares, making him the largest individual shareholder. Including shares held by his sisters Park Eun-hyung, Eun-kyung, Eun-hye, and his father-in-law, Huh Kyung-soo, chairman of Cosmo Group, the total shares held by related parties reportedly exceed 10%. On the other hand, Chairman Park's side holds 6.69% of shares by Chairman Park himself, 7.17% by his eldest son Vice President Park, and 0.98% by his eldest daughter Executive Director Park.

With a vote showdown expected to repeat this year, evaluations from agenda analysis and voting advisory agencies are divided. The Korea ESG Institute recommended supporting the agenda items proposed by Kumho Petrochemical. The items recommended for approval include ▲dividend proposal ▲appointment of outside director Park Sang-soo ▲appointment of audit committee member Park Sang-soo.

Regarding the dividend proposal put forward by former Executive Director Park, concerns were raised about shareholder value erosion due to excessive dividends. Given the planned expenditures aligned with Kumho Petrochemical's mid- to long-term investment plans, the total dividend amount proposed by the shareholder side is considered a significant burden on the company compared to the average controlling shareholder net income over the past five years.

Previously, the world's two major voting advisory firms, ISS and Glass Lewis, also recommended 'support' for both the dividend proposal and the outside director appointment proposed by Kumho Petrochemical. ISS stated in its report, "Kumho Petrochemical's operational performance has been solid, and management has effectively improved the dividend policy." It also evaluated the company's commitment to selling non-core assets and its explanation of the treasury stock management plan as shareholder-friendly and positive signals.

Glass Lewis noted that Kumho Petrochemical's dividend payout ratio, based on separate financial statements, has risen to 28.5% over the past four years since 2017, and cited the dividend policy exceeding cash dividends based on separate net income as grounds for support.

On the other hand, the Korea Corporate Governance Service (KCGS) expressed partial support for the shareholder proposal by former Executive Director Park. KCGS stated, "There is a high risk of agency problems due to excessive cash holdings," and judged that "in addition to free cash flow, unrelated assets and some treasury stocks already held will be used as investment funds, so the investment funds are sufficient compared to the investment plans."

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