POSCO Approaching End of Chairman's Term... Will Outside Directors Be Replaced Like KT?

Important Role of Outside Directors in Senior Appointment Process
Current Board Members Notably Linked to Past Administrations

Who will succeed the throne of the POSCO Group, a company gaining attention as a secondary battery material enterprise, is already drawing significant interest. First, all eyes are on the actions of Chairman Choi Jeong-woo, whose term ends in March next year. Although Chairman Choi has received positive evaluations from shareholders thanks to the recently increased stock price, accountability issues remain regarding a series of incidents such as the controversy over relocating the holding company's address, 'self performance bonuses,' and the 'Hinnamnor flooding.'

In the business community, there has been speculation since the launch of the Yoon Seok-yeol administration that Chairman Choi might not complete his term, leading to a dominant opinion anticipating a leadership change. Since most outside directors who nominate chairman candidates were appointed during Chairman Choi's term, there is also speculation that the case of KT, where the outside director board was replaced before appointing a new chairman, might be repeated.

The KT nomination committee, mainly composed of existing outside directors, selected President Yoon Kyung-rim as the representative candidate. However, the ruling party and others rejected this, calling it a 'cartel.' President Yoon eventually withdrew his candidacy. Subsequently, the nomination committee formed by new outside directors recommended former LG CNS President Kim Young-seop as the representative candidate. There was also analysis that the term 'cartel' targeted not only existing KT employees but also outside directors who hold the authority to elect the CEO.

If Chairman Choi safely completes his official term at next year's shareholders' meeting, he will set a record as the first CEO in POSCO's history to serve a full term. Chairman Choi, who became the 9th chairman in July 2018, has maintained the throne for five years after successfully renewing his term in March 2021.

All previous POSCO chairmen were dishonorably dismissed after regime changes. The late Park Tae-joon, the first chairman, stepped down in 1992 due to political conflicts with former President Kim Young-sam. The 2nd Chairman Hwang Kyung-no and the 3rd Chairman Jung Myung-sik both failed to complete their terms. The 4th Chairman Kim Man-je, 5th Chairman Yoo Sang-bu, 6th Chairman Lee Gu-taek, 7th Chairman Jung Joon-yang, and 8th Chairman Kwon Oh-joon all followed the same path.

POSCO Building, Yeoksam-dong, Gangnam-gu, Seoul. Photo by Younghan Heo younghan@

Since the launch of the Yoon administration, POSCO, along with KT, has been identified as a target for improving ownership-dispersed corporate governance. However, attention was first focused on KT, which attempted a 'self-renewal' after its term ended, and Chairman Choi attracted interest relatively later. The National Pension Service, which demanded "governance improvement" from POSCO and KT earlier this year, did not oppose major agenda items at POSCO's shareholders' meeting in March.

The POSCO Group has operated a 'CEO Candidate Recommendation Committee' since 2006 to enhance fairness and transparency in the chairman appointment process. It is an independent body composed entirely of outside directors without participation from inside directors, responsible for screening and recommending CEO candidates. Its nature and composition are very similar to KT's nomination committee.

The committee, expected to be formed around the end of this year, will select a separate pool of candidates and recommend the final candidate through listening to opinions and interviews with employees, creditors, and subsidiary representatives. The CEO will then be finalized through a vote at the shareholders' meeting in March next year.

Currently, POSCO Holdings' outside directors include seven members: former Minister of Oceans and Fisheries Kim Sung-jin, former Minister of Environment Yoo Young-sook, former Public Procurement Service Commissioner Kwon Tae-gyun, former LG Chem President Yoo Jin-nyung, Yonsei University Professor Son Sung-kyu, Seoul National University Professor Park Hee-jae, and Yonsei University Professor Kim Joon-ki.

Some attract more attention due to their ties with past administrations. Director Kim Sung-jin served as a minister during the Roh Moo-hyun administration, while Yoo Young-sook and Kwon Tae-gyun held high-ranking public positions during the Lee Myung-bak administration. Director Son Sung-kyu is one year senior to President Yoon Seok-yeol at Chung-Ang High School.

A business community official said, "They are recognized experts in their respective fields, and it is difficult to view the board as pro-POSCO personnel or politically biased," but added, "However, the fairness of selecting the next chairman candidate from the perspective of governance improvement is another issue."

This implies the need to verify the fairness of the outside directors who serve as recommendation committee members before selecting the new POSCO representative. Going through this process ensures that after confirming the new candidate, POSCO can avoid the confusion KT experienced, where the process was disrupted and restarted to select a new candidate.

There is also an assessment that, like KT, all outside directors could be replaced before selecting the chairman candidate. KT held an extraordinary shareholders' meeting in June to replace all seven outside directors, and the nomination committee formed by them selected former LG CNS President Kim Young-seop as the CEO candidate on the 4th.

Shareholders and local communities, who ultimately approve the chairman appointment, are closely monitoring the next chairman selection process. Shareholders are inevitably sensitive to sudden governance changes that could affect the recently soaring stock price. Opposition sentiment could form at any time during the chairman appointment process. Voices of dissatisfaction against Chairman Choi have emerged recently in regions such as Pohang and Gwangyang, even holding resignation rallies citing regional neglect. This is also analyzed as a variable that could affect the next chairman appointment.

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