Supreme Court: "Former Hi-Mart Chairman Seon Jong-gu's 18.2 Billion KRW Salary Increase Unjust"

[Asia Economy Reporter Kim Hyung-min] The Supreme Court has ruled that the 18.2 billion KRW increase in compensation received by former Hi-Mart Chairman Seon Jong-gu during his tenure was "not lawful."

The Supreme Court's First Division (Presiding Justice Park Jung-hwa) announced on the 5th that it overturned the lower court ruling, which partially ruled in favor of the defendants in the damages claim lawsuit filed by Lotte Hi-Mart against former Chairman Seon, and remanded the case to the Seoul High Court.

The court pointed out that "the shareholders' meeting only approved the total annual compensation limit, but no resolution was made regarding the specific compensation payments to individual directors," and stated that the lower court misunderstood the legal principles concerning directors' compensation claims.

However, the lower court's judgment was upheld regarding the remaining issues, including former Chairman Seon's severance pay, payment for paintings, and the return of the salary paid to the chauffeur employed for former Chairman Seon's spouse.

Lotte Hi-Mart filed a lawsuit demanding the return of the unjustified increase of 18.2 billion KRW, claiming that the compensation was significantly increased without proper procedures during former Chairman Seon's tenure from February 2008 to April 2011.

In fact, former Chairman Seon's annual salary was about 1.9 billion KRW from 2005 to 2007, but it rose to around 5.5 billion KRW from 2008 to 2010.

Lotte Hi-Mart also claimed damages related to former Chairman Seon's sale of a painting to the company for 80 million KRW, arguing that it was a "self-dealing transaction by a director" requiring board approval, which was not followed.

The company also filed a lawsuit demanding the return of 88 million KRW in chauffeur salary payments, alleging that employing a chauffeur for former Chairman Seon's spouse and paying the salary with company funds violated the law.

In response, former Chairman Seon, who served as a company director from January 1998 to May 2012, filed a counterclaim against Lotte Hi-Mart, arguing that he did not receive severance pay of 5.2 billion KRW.

The first trial ruled that the increase in former Chairman Seon's compensation was reasonable.

It also found his severance pay claim to be legitimate. However, it ruled that the painting sale and chauffeur salary payments were problematic and ordered Lotte Hi-Mart to pay 5.1 billion KRW in severance pay after deducting the painting price and chauffeur salary from the amount claimed by former Chairman Seon.

The second trial mostly upheld the first trial's judgment but ruled that the 1.4 billion KRW increase in compensation from January to April 2011 was unjustified as no specific resolution was made at the shareholders' meeting, ordering Lotte Hi-Mart to pay about 3.7 billion KRW to former Chairman Seon.