"Successive Resignations of Independent Directors at Korea Company: Transition to Professional Management Needed"

Criticism Raised by Korea Corporate Governance Forum Statement

Audit Committee Members and Outside Directors Resign Ahead of Shareholders' Meeting

Chairman Cho's Conviction for Embezzlement and Breach of Trust Highlighted; "Excessive Remuneration" Also Pointed Out

The Korea Corporate Governance Forum has pointed out the successive voluntary resignations of independent directors within Korea Company Group, emphasizing the need to transition to a professional management system.

On the 19th, the Forum issued a statement regarding this issue. The Forum noted, "Ahead of the general shareholders' meeting, three independent directors or candidates recommended for Korea Company and Hankook Tire & Technology have recently resigned voluntarily—an extremely rare occurrence," raising concerns about the independence of the board of directors and the stability of its operations.

According to Korea Company's public disclosure, on the 11th, Kim Yongah, a newly appointed outside director candidate, voluntarily withdrew from candidacy for outside director and audit committee member. On the same day, Hankook Tire & Technology also saw the resignation of Lee Eunkyung, a candidate for outside director. On the 17th, Kim Jeongyeon, an outside director and audit committee member, resigned during her term.

The Forum criticized, "The voluntary resignations of audit committee members and independent directors (or candidates) are likely related to the 'key man risk' posed by Korea Company Chairman Cho Hyunbum, the controlling shareholder, who was sentenced to two years in prison in the second trial on charges including embezzlement and breach of trust."

The Forum also criticized a proposed amendment to the articles of incorporation of Hankook Tire & Technology that would establish a provision to limit the liability of directors to the company. This proposal would exempt directors from liability exceeding six times (or three times for outside directors) the total remuneration received in the most recent year prior to the act in question—including bonuses and profits from exercising stock options—if approved by a resolution of the general shareholders' meeting.

The Forum stated, "This is merely a stopgap measure devised by legal experts to prevent the departure of independent directors, and it carries a significant risk of conflicts of interest," adding, "The attempt to revise the articles of incorporation to reduce directors' liability appears to be a tactic to dilute amendments to the Commercial Act under the Lee Jaemyung administration."

The Forum also questioned Chairman Cho Hyunbum's remuneration. Citing the 2024 proxy voting guidelines of the international proxy advisory firm ISS, which recommend the dismissal of directors and executives with civil or criminal convictions for bribery or embezzlement, the Forum pointed out that last year, Chairman Cho received a total remuneration of 9.3 billion won.

The Forum added, "Since Chairman Cho resigned as CEO and inside director through a public disclosure on February 20, his compensation is not subject to approval by the board of directors or the general shareholders' meeting," emphasizing, "There must be oversight to ensure that Chairman Cho does not receive excessive remuneration." The Forum further stated, "It is in line with global standards for the board chair, rather than the CEO, to preside over the general shareholders' meeting, and for all independent directors to attend and listen to shareholders' opinions."

Chairman Cho Hyunbum of Hankook & Company is answering reporters' questions as he enters the Pi Factory Studio in Gwangjin-gu, Seoul on March 6 last year to meet with Stephan Winkelmann, Chairman of Lamborghini. Photo by Yonhap News

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