Activist Fund 'Eollain'... Aiming to Enter JB Financial Board of Directors

Activist fund Align Partners, which gained market attention last year by successfully reforming SM Entertainment, is focusing this year on restructuring the board of directors of JB Financial Group. Align plans to put effort into entering the board by recommending Namwoo Lee, chairman of the Korea Corporate Governance Forum, as an outside director.

Changhwan Lee, CEO of Align Partners Asset Management, recently told Asia Economy, "This year, we plan to concentrate all efforts on the JB Financial Group shareholders' meeting," adding, "Our goal is to appoint at least one director recommended by Align."

Align Partners proposed to JB Financial Group the nomination of five board director candidates along with a proposal to increase the number of directors. The candidates recommended by Align Partners include outside directors Kiseok Kim, Sujin Jung, Donghwan Kim, Namwoo Lee as a non-standing director, and Heeseung Lee as an outside director who will serve on the audit committee. Additionally, candidate Junseung Baek was added as a non-standing director candidate, with a request to appoint Baek if the number of outside directors serving on the audit committee increases to two or more.

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The lineup of directors recommended by Align includes distinguished figures. Namwoo Lee, recommended by Align as a non-standing director of JB Financial, is a global investment and capital markets expert who has served as the inaugural head of the Samsung Securities Research Center and co-CEO of Merrill Lynch Korea. He currently chairs the Korea Corporate Governance Forum. As a leading domestic corporate governance expert, he is expected to play a significant role in improving JB Financial's shareholder return policies and governance.

Outside director candidate Kiseok Kim is a former head of the Australia and New Zealand (ANZ) Bank Korea branch and founder of the crowdfunding company Crowdy. Candidate Junseung Baek is recognized as a global investment and capital markets expert with experience at Citigroup Research Center and Fidelity. It is analyzed that he can contribute to improving JB Financial's shareholder return policies and communication with foreign investors holding more than 35% of shares. Donghwan Kim, another candidate, has worked at Goldman Sachs and SoftBank Ventures, served as CEO of Hana Ventures, and is currently CEO of UTC Investment.

CEO Lee said, "Unlike the financial and IT experts recommended by Align, JB Financial has recommended the reappointment of all existing outside directors who have served for an average of more than four years," explaining, "The Financial Supervisory Service pointed out governance concentration centered on academics, legal professionals, bureaucrats, and accountants." He emphasized, "By appointing outside directors recommended by Align, JB Financial's board can be upgraded by including a large number of global investment, capital markets, information technology, and governance experts."

Align believes that it is more advantageous for shareholder value if JB Financial uses profits for share buybacks and cancellations rather than asset growth. They have continuously urged the JB Financial board to adopt a policy principle of a 50% shareholder return rate focused on share buybacks and cancellations while lowering the growth rate of risk-weighted assets such as loans.

However, JB Financial maintains a target growth rate of 7-8% for risk-weighted assets annually and has not presented specific shareholder return targets. Align judges that the fundamental cause is the lack of diversity, expertise, and independence on JB Financial's board.

Previously, JB Financial Group solicited outside director candidate nominations from shareholders with voting rights. In line with the Financial Supervisory Service's announcement of best governance practices, JB Financial established a 'Shareholder Nomination System for Outside Director Candidates' allowing any shareholder holding even one voting share for more than six months to recommend outside director candidates.

Accordingly, Align proposed increasing the number of outside directors, excluding those serving on the audit committee, to eight and increasing the number of non-standing directors to two. Currently, JB Financial's board consists of one non-standing director and seven outside directors, including those serving on the audit committee. If Align's proposals are fully accepted, the total number of directors will increase to 14.

At the JB Financial Group's regular shareholders' meeting scheduled for the 28th, a vote is expected on Align Partners' agenda items, including the increase of outside and non-standing directors and the appointment of shareholder-proposed director candidates. The final decision will be made through voting at the meeting. Meanwhile, Align Partners holds a 14.04% stake in JB Financial Group, making it the second-largest shareholder. The gap with the largest shareholder, Samyang Corporation and its affiliates, which hold 14.61%, is only 0.57 percentage points.

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