The Prospects of KT CEO Koo Hyun-mo's Reappointment... Opportunities and Risks (Comprehensive)

Achievements including Traditional KT Man and Reaching Market Cap of 10 Trillion
Regarding Priority Review of Incumbent CEO Reappointment
National Pension Service's Opposition Stance

[Asia Economy Reporter Cha Min-young] "Self-renewal and concerns about emperor-like reappointment must be resolved and aligned with shareholder value."

Seo Won-ju, the newly appointed Fund Director (Head of Fund Management Headquarters) of the National Pension Service, said this upon taking office on the 27th. Although no specific company was named, the remark was directed at KT. Gu, who has led KT for three years, was receiving evaluations of successful structural reform and solid performance, with little obstacle to reappointment. Considering the past when KT's leadership changed with each regime change, there was also the rationale that no more political pressure should be exerted on the privatized KT. However, challenges remain, including disputes over the procedural fairness of the National Pension Service and a prosecution investigation surrounding Gu himself.

Optimism for Koo Hyun-mo’s Reappointment: ‘KT Man, Market Cap 10 Trillion, Union Support’

Gu first connected with KT in 1987 as a researcher at the KT Economic Management Research Institute. He is a ‘KT man’ who has worked at KT for over 30 years, holding key positions such as head of management strategy, chief secretary, and president of management support. After taking office, Gu emphasized 탈(tal)-telecommunications, strengthening the B2B sector with a focus on artificial intelligence (AI) technology and digital transformation (DX). He also secured significant M&A achievements, including the acquisition of HCN, a Hyundai Department Store affiliate. Successes were also seen in the media and content sectors, such as the hit drama ‘Extraordinary Attorney Woo’.

KT’s revenue in the first half of 2022 reached a record high of 12.5899 trillion won, with operating profit at 1.0858 trillion won. The corporate value also rose accordingly. Since Gu took charge, KT’s stock price has risen about 35%. The market capitalization is currently around 9.4 trillion won, approaching 10 trillion won. In August, when the stock price peaked, the market cap briefly surpassed the 10 trillion won mark.

The first labor union, with 16,000 KT employees as members, has recently officially supported Gu’s reappointment. There is also speculation that even if a new candidate is brought in through external recommendation, it would be difficult to surpass Gu’s three-year performance.

Considerable Pessimism: ‘Self-Reappointment, Illegal Acts, Communication Failures’

The biggest hurdle Gu must overcome is the controversy over ‘self-reappointment.’ The largest shareholder of KT is the National Pension Service, holding a 10.35% stake. Other major shareholders with over 5% stakes are Shinhan Bank and the UK-based investment firm Silchester International Investors. The remaining 57.4% is held by minority shareholders. Seo, the Fund Director of the National Pension Service, raised objections, saying, "If the board discriminates opportunities internally or restricts external participation, shareholders may be forced to choose one person." Kim Tae-hyun, Chairman of the National Pension Service, has also pointed out the same issue.

Gu himself faces political and judicial risks. In November last year, the Seoul Central District Prosecutors’ Office summarily indicted Gu Hyun-mo and 10 executives on charges of violating the Political Funds Act and embezzlement. The U.S. Securities and Exchange Commission (SEC) also imposed a fine of $6.3 million (about 7.5 billion won) for accounting irregularities. Issues included inappropriate political donations by KT employees and allegations of providing money or valuables in exchange for winning Vietnamese government projects. Last month, the court issued a summary order fining Gu 15 million won, but Gu appealed and requested a formal trial. However, KT’s regulations stipulate resignation recommendations only for prison sentences or higher, so this is not a direct disqualification. Additionally, Gu faces criticism for neglecting his core telecommunications business by reducing investments.

Except for Hwang Chang-gyu, All Failed Reappointments

Among past KT CEOs, only former Chairman Hwang Chang-gyu has effectively succeeded in reappointment. Hwang was deemed eligible for reappointment by the CEO recommendation committee and was the sole candidate for the next chairman at the March general meeting. Previously, former Chairmen Lee Seok-chae and Nam Joong-soo succeeded in reappointment but resigned in disgrace amid prosecution investigations for breach of trust during regime changes. There is also cynical criticism that it will be difficult to avoid political wind this time as well.

A senior figure with over 30 years in the telecommunications industry said, "Even at the time of Gu’s appointment, opposition party figures strongly declared support, so political influence was not absent. While KT, marking 20 years of privatization, needs to escape political pressure, it is true that it is difficult to foresee the future given the current composition of outside directors."

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