Domestic Advisory Group Opposes Lotte Chemical Executive Appointment: "May Become Opposition for the Sake of Opposition"

Owner's Court Sentencing Logic Also 'Appointment' Every Year

[Asia Economy Reporter Moon Chaeseok] With the Lotte Chemical shareholders' meeting just two days away, a domestic proxy advisory firm has cast dissenting votes. The reason cited is that the candidates supported Chairman Shin Dong-bin of the group, who received a suspended sentence from the court.

According to the financial investment industry on the 22nd, the Good Corporate Governance Institute (CGCG) cast dissenting votes against the appointment of five outside directors, excluding candidate Cho Unhaeng, who is both an outside director and a member of the audit committee, on the agenda for the Lotte Chemical shareholders' meeting scheduled for the 24th.

Regarding the appointment of inside director Lee Young-jun, the institute stated opposition because "he supported Chairman Shin, who was sentenced by the Supreme Court to 2 years and 6 months (with a 4-year suspended sentence) for breach of trust and bribery charges." The reasons for opposing the appointments of outside directors Jeon Un-bae, Lee Geum-ro, Kang Jeong-won, and Choi Hyun-min were the same as for Lee's appointment.

However, in the case of Director Choi, an additional reason was given that during his tenure at the law firm Jipyung, he provided advisory services related to ESG (Environmental, Social, and Governance) management for Lotte Chemical's plastics pilot project. The claim is that this "undermines the company's management independence."

According to Lotte Chemical's 2021 business report released on the 16th, Lotte Holdings, in which Chairman Shin and related parties hold 41.7% of common shares, has the highest stake at 25.59%. Lotte Property & Development also holds 20%. The National Pension Service is the fourth-largest shareholder with 8.72%.

Looking at recent shareholders' meetings such as those of Kumho Petrochemical Chairman Park Chan-gu and Hyosung Chairman Cho Hyun-joon, even when proxy advisory firms opposed the appointment or reappointment of owners involved in court rulings, the proposals were often approved smoothly with shareholder support. Chairman Shin is also a representative figure who has received dissenting votes at every shareholders' meeting due to reasons such as excessive concurrent positions in affiliates.

Professor Cho Myung-hyun of Korea University Business School, former head of the Korea Corporate Governance Service, said, "(Despite frequent rejections) proxy advisory firms opposing appointments based on owners' court sentences every year is positive in that it shows investors 'there are such opinions'." However, he added, "If dissenting votes are cast too dogmatically on topics that shareholders do not consider important, it could lead to results of 'opposition for the sake of opposition'."

The Good Corporate Governance Institute was established in November 2001 by experts from the legal, academic, and accounting fields. It is a proxy advisory firm that serves foreign companies as clients and analyzes and advises on governance and management transparency of domestic companies.

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