Hyosung Heavy Industries' Board Size Reduction Plan Rejected at Shareholders' Meeting... Halted by National Pension Service Opposition

Management Defense Strategy Falls Through Ahead of Cumulative Voting System Implementation

Hyosung Heavy Industries' proposal to reduce the number of board directors, which was put forward at its annual general shareholders' meeting, was voted down due to opposition from the National Pension Service. Since this measure was widely interpreted as an attempt to defend management rights ahead of the implementation of the revised Commercial Act, it is expected to have a significant impact on the company's future governance structure.

Woo Taehee, CEO of Hyosung Heavy Industries, is explaining about the transformer factory at the groundbreaking ceremony for the Hyosung Heavy Industries Changwon HVDC Transformer Factory held on July 30 last year at the site of the company's 3rd factory in Seongsan-gu, Changwon-si, Gyeongnam. Photo by Yonhap News

According to industry sources on March 19, Hyosung Heavy Industries held its annual general shareholders' meeting at the Hyosung Building in Mapo-gu, Seoul, and proposed an amendment to its articles of incorporation to reduce the number of board directors from the current range of 3 to 16 to a new range of 3 to 9. However, the proposal failed to pass. The amendment also included provisions to strengthen the qualifications required for board directors and to make the term of office more flexible within a three-year limit.

This attempt to amend the articles of incorporation drew attention, as it coincided with the revised Commercial Act, which is scheduled to take effect in the second half of this year. Under the amendment, the introduction of cumulative voting for large corporations means that the more directors are elected at once, the greater the chance that candidates supported by minority shareholders can join the board. As a result, some companies have moved to reduce the size of their boards as a way to protect management rights.

The National Pension Service made its opposition clear on these grounds. Prior to the shareholders' meeting, the National Pension Service stated, "Reducing the maximum number of directors could weaken the ability of ordinary shareholders to make shareholder proposals and request cumulative voting," and added, "It is possible to operate a reasonably sized board without amending the articles of incorporation." The National Pension Service also raised concerns that such a change could limit the entry of directors with diverse backgrounds and expertise onto the board, and expressed opposition to the proposal to make outside directors' terms more flexible.

On this day, the National Pension Service also voted against the proposal to approve the limit on directors' remuneration, but that agenda item passed as originally submitted at the shareholders' meeting.

Hyosung Heavy Industries stated, "We respect the decision of our shareholders," and added, "We will re-examine the proposal, come up with effective alternatives that enhance shareholder value, and continue to communicate with the market."

Woo Taehee, CEO of Hyosung Heavy Industries, emphasized the importance of strengthening competitiveness through the use of artificial intelligence (AI) in his greeting. He stated, "We will create new growth opportunities through the development of new AI-based businesses and products," and added, "By enhancing company-wide AI capabilities, we will also improve work efficiency."

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