Three Challenges to KT CEO Koo Hyun-mo's Reappointment

"Self-Reappointment" Sharp Criticism of National Pension Day
Political Fund Law Violation and Favoritism Controversy
Achievements in 탈통신 but Large-Scale Communication Outage

KT CEO Koo Hyun-mo is attending and presenting at the 'KT AI Strategy Press Conference' held on the 16th at the Sofitel Ambassador Seoul Grand Ballroom in Songpa-gu, Seoul. Photo by Kang Jin-hyung aymsdream@

[Asia Economy Reporter Cha Min-young] As KT begins the process of appointing a new CEO, the business community is paying close attention to whether current KT CEO Koo Hyun-mo’s reappointment will be confirmed or if a third-party candidate will emerge. Although the CEO Candidate Screening Committee, which reviewed Koo’s eligibility for reappointment, gave a 'qualified' judgment, Koo declared he would "compete against multiple candidates," voluntarily initiating a competitive election. The procedural fairness of the process also drew attention as the National Pension Service (NPS) directly mentioned concerns about 'self-reappointment' regarding KT’s internal regulations that allow priority screening for incumbent CEOs.

"Concerns Over Self-Reappointment and Emperor-Style Reappointment Must Be Resolved" - Sharp Criticism from National Pension Service

One of the hurdles Koo Hyun-mo must overcome is the controversy over 'self-reappointment.' On the 27th, Seo Won-joo, the newly appointed Fund Director (Head of Fund Management) of the National Pension Service, cited POSCO and KT as examples in his inaugural remarks, emphasizing the need to strengthen shareholder rights in widely held companies. Seo stated, "Widely held companies must appoint CEOs based on objective, rational, and transparent criteria to resolve concerns about unfair competition, self-reappointment, and emperor-style reappointment, thereby aligning with shareholder value." He added, "If opportunities are discriminated against within the board or external participation is restricted, shareholders may be forced to choose one person without knowing potential candidates." Widely held companies are those without a clear majority shareholder, such as KT, POSCO, and financial holding companies. Currently, KT’s largest shareholder is the National Pension Service, holding 10.35% of shares, with other major shareholders holding over 5% including Shinhan Bank and the UK-based investment firm Silchester International Investors. The remaining 57.4% is held by minority shareholders. This explains why KT must be mindful of the NPS’s stance. In fact, the NPS opposed the reappointment of Park Jong-wook, Head of Management, as an inside director at KT’s shareholders’ meeting in March, causing the motion to fail.

Industry analysts interpret the unusual press briefing by Seo as the NPS applying a fairness standard to CEO Koo, concerned that prioritizing the incumbent’s reappointment could harm the interests of all shareholders. Earlier, on the 8th of this month, Kim Tae-hyun, Chairman of the NPS, also criticized the issue during a press briefing, stating, "Widely held companies face controversy over internal discrimination such as priority screening for incumbents and the acceptance of external candidates in the CEO or chairman appointment and reappointment process." Although no company names were mentioned at the time, the remarks were interpreted as targeting POSCO and KT. The NPS’s firm stance, which inevitably reflects the Yoon Seok-yeol administration’s intentions, appears to have influenced Koo’s counterproposal for a competitive election after being judged 'qualified for reappointment' on the 13th of this month.

The NPS’s position is to 'open the door to external candidates.' Seo said, "Candidates should be given unlimited opportunities through open recruitment so that the best candidate can be found both internally and externally." He added, "To avoid concerns about self-reappointment, the nomination committee should be composed of reputable, neutral new members rather than existing directors to ensure fairness." KT’s Governance Committee’s method for selecting CEO candidates is broadly divided into internal recommendations and external talent recommendations from professional agencies. Last week, KT reportedly sought internal candidates within the group and also received external candidate recommendations. However, KT’s PR team currently remains silent, stating, "We do not know specific schedules or qualification requirements," and is withholding information even as the year turns. In contrast, during the 2019 CEO selection process following former Chairman Hwang Chang-gyu’s departure, KT publicly disclosed the external recruitment and screening schedule in detail.

Political Funds Law Violation Controversy Over 'Split Donations'

CEO Koo himself faces political and judicial risks. He has not escaped allegations of making 'split donations' to lawmakers from both ruling and opposition parties using company funds. KT’s second labor union, KT Saenozu, affiliated with the Korean Confederation of Trade Unions, issued a statement opposing Koo’s reappointment, saying, "CEO Koo Hyun-mo is currently a criminal suspect undergoing a formal trial after receiving a summary order of a 15 million won fine for violations of the Political Funds Act and embezzlement." In November last year, the Seoul Central District Prosecutors’ Office filed summary indictments against Koo and nine other executives for violations of the Political Funds Act and embezzlement. Although the court issued a summary order imposing a 15 million won fine on Koo last month, he appealed and requested a formal trial. According to Saenozu, when Koo was appointed CEO in 2019, the board approved his appointment conditionally on the promise that he would resign if any illegal acts were revealed during his tenure. Saenozu insists that the board should now honor that promise. However, KT’s regulations only recommend resignation if the individual receives a prison sentence or higher, so this is not a direct disqualification.

The split donation allegations have directly resulted in financial losses. In February, KT was fined $6.3 million (approximately 7.5 billion won) by the U.S. Securities and Exchange Commission (SEC) for accounting irregularities. The issues involved allegations that KT employees provided political donations to lawmakers through improper means and gave bribes to secure government projects in Vietnam. KT has not commented on the SEC’s allegations but complied with the fine imposition order. The Economic Reform Solidarity has urged KT’s Audit Committee to "seek reimbursement or file damages lawsuits against responsible current and former executives to recover losses equivalent to the agreed penalties" and demanded "the dismissal of executives found guilty or involved in illegal acts related to the incidents."

Another risk factor for incumbent CEO Koo is the recent investigation by the Korea Fair Trade Commission into KT Telecop, KT’s security affiliate, on suspicion of 'preferential subcontracting.' KT Telecop is a domestic security company in which KT holds an 87.73% stake. It is alleged that KT Telecop funneled work to specific companies while outsourcing facility management services.

Weak Support Base... 'Communication Blackout' Issue Also

Koo Hyun-mo’s weak internal support base is also seen as a factor lowering his chances of reappointment. A veteran with over 30 years in the telecommunications industry said, "Even during the 2019 CEO election, Koo was considered weaker compared to other candidates. He was able to rise thanks to support from opposition-aligned figures. I understand there are many opponents on the board." This complex relationship is believed to have influenced why the CEO Candidate Screening Committee, which handled the priority screening for reappointment at Koo’s request, did not result in a reappointment decision at its first meeting on the 8th of this month. In fact, among past CEOs, only former Chairman Hwang Chang-gyu has effectively succeeded in reappointment. Hwang was reappointed in 2017 amid the chaotic political climate caused by the 'Choi Soon-sil scandal' with relatively little friction. He was judged qualified for reappointment by the CEO Recommendation Committee and was the sole candidate for chairman at the March shareholders’ meeting. Prior to that, former Chairmen Lee Seok-chae and Nam Joong-soo appeared to succeed in reappointment but were forced to resign in disgrace amid prosecutorial investigations for breach of trust during regime changes.

Meanwhile, the 'Digico (Digital Platform Company) KT' concept, which CEO Koo has consistently emphasized since his appointment in March 2020, has also produced some side effects. While focusing on 탈(脫)통신 (de-telecommunication) as a key theme, KT achieved results such as enhancing corporate value and increasing B2B service sales, but it could not avoid criticism for neglecting its core telecommunications business. A representative example is the 'KT wired and wireless network outage' in October last year, three years after the 'Ahyeon fire' in 2018. The core cause was the absence of a telecommunications management system during network modernization work. Since then, KT’s capital expenditure (CAPEX) has continuously decreased, raising ongoing concerns about KT, including from competitors. KT’s CAPEX was 2.8551 trillion won in 2021, down 16.9 billion won (5.6%) from 2.872 trillion won last year. It was about 620 billion won less than in 2019, the inaugural year of 5G service.

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