Industry Evaluates Shareholder Alliance Board Candidates as "Falling Short of Expectations"
Battle Over Board Composition and Small Shareholder Unity Intensifies Ahead of General Meeting
[Asia Economy Reporter Yu Je-hoon] The anti-Jo Won-tae coalition has unveiled a shareholder proposal card recommending eight internal and external directors of Hanjin KAL, including professional managers. The intention is to form a majority faction within the board of directors through the shareholders' meeting scheduled for March.
Chairman Jo, who launched a preemptive strike by presenting a 'management innovation plan,' is also expected to soon disclose his own slate of internal and external director candidates, including his reappointment proposal. Along with the votes of institutional and individual investors holding the key to this management rights dispute, the Hanjin Group management battle is evolving into a 'numbers game.'
◆ 'Management Innovation' vs. 'Professional Managers' Tug of War = According to industry sources on the 14th, the 'Shareholders' Coalition for the Normalization of Hanjin Group'?composed of former Korean Air Vice President Cho Hyun-ah, private equity fund KCGI, and Bando Construction?submitted a shareholder proposal to Hanjin KAL the previous day recommending eight internal and external directors, including professional managers. The internal director candidates are ▲ Kim Shin-bae, former Vice Chairman of SK Group ▲ Bae Kyung-tae, former Vice President of Samsung Electronics ▲ Kim Chi-hoon, former General Manager (Executive Director) of Korea Airport Ground Handling Headquarters ▲ Ham Cheol-ho, former CEO of T'way Air (Other Non-Executive Director), totaling four. The external director nominees are ▲ Seo Yoon-seok, Professor at Ewha Womans University ▲ Yeo Eun-jung, Professor at Chung-Ang University ▲ Lee Hyung-seok, Professor at Suwon University ▲ Koo Bon-ju, Lawyer at the law firm People and People, also four in total.
Industry insiders view the shareholders' coalition as fully leveraging Hanjin KAL's characteristic of having no statutory limit on the number of internal and external directors, attempting to form a majority faction on the board. The coalition has proposed amending the articles of incorporation to specify individual voting during director appointments to facilitate this.
This shareholder proposal from the coalition is interpreted as a counterattack following Chairman Jo's release of the 'management innovation plan' last week. Jo's plan includes governance improvements such as separating the chairman of the board and CEO roles and securing financial soundness through the sale of non-core assets.
◆ "Both Sides' Moves Are Underwhelming" Evaluations = The market is also evaluating that the countermeasures presented by both sides fall short of expectations. Although the shareholders' coalition has recruited 'big-name' managers, the internal director candidates have backgrounds distant from logistics and transportation industries, somewhat diminishing the rationale for introducing a 'professional management system.' Former Vice Chairman Kim and former Vice President Bae, from SK and Samsung respectively, built their careers in telecommunications and electronics/electrical fields, with little connection to the airline transportation sector.
Questions remain about the expertise of Korean Air-affiliated candidates. Kim, the former executive director categorized as an associate of former Vice President Cho, built his career through hotel and airport-related work. After being promoted to executive director at Korean Air, he moved to the subsidiary Korea Airport, mainly handling ground support operations. Ham, who handled international affairs during his tenure at Korean Air, served as CEO of the low-cost carrier (LCC) T'way Air but has been out of the industry for over ten years.
An official from a national airline said, "Although the talent pool is narrow due to the characteristics of the Korean aviation industry, there is no notable aviation industry expert among the internal director candidates. Considering the global network essential to the aviation industry, the lineup is somewhat disappointing."
Jo's innovation plan has also been evaluated as somewhat bland. The core financial improvement assets targeted for sale?the Jongno Songhyeon-dong site, Wangsang Leisure Development Co., and the Paradise Hotel Jeju site?each have clear pros and cons, leading to expectations that the sales process will not be smooth.
◆ Fierce Numbers Game on the Board... Interest in Electronic Voting System Adoption = As the shareholders' coalition has revealed its intention to seize control of the board, Chairman Jo is also expected to disclose his reappointment proposal and new internal and external director candidates at the Hanjin KAL board meeting anticipated at the end of this month. Since the coalition has recommended eight director candidates, Jo's side is likely to increase the number of internal and external directors in response.
The 'numbers game' is expected to extend to general shareholders, whose votes will determine the outcome of the shareholders' meeting. Chairman Jo holds 33.45% of Hanjin KAL shares, while the shareholders' coalition holds 31.98% (both based on valid voting rights), with a narrow gap of 1.47 percentage points, making the votes of general shareholders holding 30% crucial.
The key issue is whether to adopt an electronic voting system. According to related industries, Hanjin Group is actively considering introducing electronic voting at next month's shareholders' meeting. A representative from the Korea Securities Depository, which operates the K-eVote electronic voting system, stated, "It is true that Hanjin KAL has recently made several inquiries regarding the adoption of electronic voting." Although Hanjin KAL rejected KCGI's request for electronic voting last year citing 'lack of reliability,' it appears to be actively considering its introduction this year. The three-party coalition also sent a shareholder proposal to Hanjin KAL yesterday demanding clear adoption of electronic voting.
Accordingly, the battle to capture the votes of minority shareholders is expected to intensify. At last year's shareholders' meeting, the attendance rate of minority shareholders was 77.8%. If electronic voting is implemented, it is expected that even more shareholders will participate in voting.
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