Three Key Variables in KT's Next CEO Election Shareholders' Meeting: 'Foreign Investors, Friendly Shares, and Angry Retail Investors'

Largest Single Shareholder 국민연금 May Vote Against
Foreign and Individual Investors Relatively Supportive of KT

On the afternoon of the 7th, KT held a board meeting and conducted interviews with four shortlisted candidates for the next CEO position, ultimately selecting Yoon Kyung-rim, head of the KT Group Transformation Division (President), as the final candidate. Despite strong criticism from the ruling party after the shortlist announcement, including accusations of a "KT insiders' league" and an "interest cartel," the company did not halt the nomination process. KT stated that since CEO Koo Hyun-mo's term ends this month, they could not delay the shareholder meeting schedule and related procedures any further. According to commercial law, a letter notifying all shareholders of the agenda, including the next CEO candidate, must be sent in writing two weeks before the shareholder meeting.

Now, attention is focused on what kind of results Yoon Kyung-rim, the nominated KT CEO, will receive at the shareholder meeting scheduled for the end of this month. The three major variables in the shareholder meeting to elect KT's next CEO are the foreign shareholders holding 43% of the shares, Hyundai Motor Group and Shinhan Bank who have formed strategic alliances with KT through share swaps, and individual investors who are angry about the sharp drop in KT's stock price due to government interference.

External Candidates with No KT Ties All Eliminated from the Shortlist

The shortlist was narrowed down to four current and former 'KT men.' Although there were initial expectations that political and governmental figures would be strong contenders, all external candidates with no ties to KT were eliminated from the candidate pool. On the 28th, KT's board selected four candidates for the CEO shortlist: Park Yoon-young, former head of KT's Enterprise Division (President); Shin Soo-jung, head of KT's Enterprise Division (Vice President); Yoon Kyung-rim (President); and Lim Heon-moon, former head of KT's Mass Division (President). This was the result of screening 33 candidates excluding the current CEO Koo Hyun-mo, who withdrew from the race. Among external candidates, prominent figures such as Yoon Jin-sik, former Minister of Industry and Resources, were eliminated.

Yoon Kyung-rim, who was selected as the final candidate, must undergo a shareholder vote at the shareholder meeting at the end of this month to become KT's CEO. The resolution requirement for the shareholder meeting is at least one-quarter of the total issued shares and a majority vote of attending shareholders. The CEO's term is three years, until March 2026.

Previously, KT had selected the current CEO Koo Hyun-mo twice as the next CEO candidate. However, due to strong criticism and pressure from the political sphere regarding 'self-renewal' and 'opaque selection,' the existing process was halted, and a public competition method was restarted in early last month. This was largely influenced by President Yoon Suk-yeol's emphasis earlier this year on fairness and transparency in CEO selection procedures for widely held companies. CEO Koo expressed his intention to seek reappointment by participating in the re-application but eventually withdrew from the race on the 23rd of last month.

Choices of Hyundai Motor and Shinhan Bank, Strategic Allies of KT

Although Yoon Kyung-rim was selected as the final candidate, strong opposition from the Presidential Office and the ruling party makes it difficult to predict the shareholder meeting outcome. To exercise voting rights at this meeting, shareholders must be listed in KT's shareholder registry as of the end of last year. At that time, the major shareholders were foreigners with 43.03%, the National Pension Service (10.35%), Shinhan Bank (5.58%), Hyundai Motor Company (4.69%), Hyundai Mobis (3.10%), employee stock ownership association (0.34%), and others (32.91%).

The largest single shareholder, the National Pension Service, has not expressed a position on the shortlist but is expected to vote against it at the shareholder meeting. This is because it has continuously criticized KT's candidate selection process and governance since the end of last year. In particular, the National Pension Service has indicated its intention to actively exercise voting rights (stewardship code activation) by pointing out the lack of transparency in the governance of widely held companies such as KT and POSCO.

The key point in the vote battle is the choice of Hyundai Motor Group and Shinhan Bank. Although they have established strategic alliances with KT through share swaps, they must also consider the government and the National Pension Service. Notably, the National Pension Service is the largest shareholder of Shinhan Financial Group with 8.29% and the second-largest shareholder of Hyundai Motor Company with 7.78%.

Combined, Shinhan Bank and Hyundai Motor Group hold 13.37% of shares, which is 3.02 percentage points more than the National Pension Service. KT formed a strategic partnership with Hyundai Motor to lead the future mobility industry, including autonomous driving, through share swaps. Similarly, KT and Shinhan Bank purchased each other's shares to maintain a long-term partnership for joint platform businesses such as the metaverse. Both companies have been strengthening their cooperation by exchanging shares while conducting business collaborations with KT, which owns the largest domestic telecommunications network, in mobility and financial sectors where network technology is essential.

In particular, KT is an indispensable strategic ally in the mobility sector. KT owns most of the domestic wired network, enabling it to build 5G networks faster than competitors. This could be a decisive factor in dominating the domestic autonomous driving market. Whether the share swaps, conducted as business alliances and friendly equity acquisitions, will prove effective at this shareholder meeting or whether these partners, considered allies, will succumb to external pressure and make a 'political choice' unfavorable to KT remains uncertain.

At the time of the share swaps, they stated the purpose was 'simple investment,' meaning they would not participate in management. From a business perspective, there is no strong reason for them to oppose the KT board's decision. From KT's standpoint, it would be a second-best outcome if these two companies simply refrained from voting against the candidate.

Sharp Drop in KT Stock Due to Political Interference Sparks Strong Backlash from Individual Investors

The biggest variables in the shareholder meeting to select KT's next CEO are the choices of foreign and individual investors. Foreign shareholders hold 43.03% of KT's shares. A financial investment industry insider said, "Under CEO Koo Hyun-mo's leadership, the stock price once rose by as much as 90%, so foreign shareholders and individual investors generally have a favorable view of the current management," adding, "It is not impossible that they will support the CEO candidate selected by KT's board." A business insider said, "Foreign investors evaluate candidates based on business vision unless there is litigation risk," and "Some foreign investors only vote against candidates if there is a final guilty verdict despite litigation risks."

Individual investors are deeply angered as KT's stock price plummeted due to political interference. The KT stock price, which soared to nearly 40,000 KRW last year, has fallen back to pre-rise levels. As signs of prolonged management vacuum emerge, KT's market capitalization, which exceeded 10 trillion KRW last year, has lost over 2 trillion KRW. Consequently, there is an outpouring of criticism against the government and political circles in KT stock discussion forums. This 'public sentiment' among retail investors is expected to influence the shareholder meeting to some extent. KT introduced electronic voting two years ago, so individual investor participation in the shareholder meeting is expected to be high.

If Rejected at Shareholder Meeting, CEO Selection Returns to Square One

If the next CEO selection is rejected at the shareholder meeting, the CEO appointment process will return to square one. This means that after KT's board resolved to re-announce the recruitment at a full meeting on the 9th of last month, which took about a month, another re-announcement would require an additional month. It is expected to take at least one and a half months to receive applications, shortlist candidates, conduct board interviews, and hold an extraordinary shareholder meeting. A two-week notice must be issued before convening the extraordinary shareholder meeting.

Amid the chaos where an outside director suddenly resigned just before the interview and all CEO candidates might withdraw en masse, attention is focused on what kind of results Yoon Kyung-rim, who was selected, will receive at the shareholder meeting. Moreover, even if she passes the shareholder meeting smoothly, a difficult path is anticipated. Yoon was known as CEO Koo Hyun-mo's 'right-hand person' and was the candidate most strongly vetoed by the ruling party.

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