Amendments to the Commercial Act, Management Rights Controversy, and Kumho Petrochemical

Chairman Park Chang-gu Predicts Dispute with Nephew
Audit Committee Election Expected to Be a Showdown

Park Chan-gu, Chairman of Kumho Petrochemical Group

[Asia Economy Reporter Choi Dae-yeol] Park Chan-gu, chairman of Kumho Petrochemical Group, who experienced a management rights dispute with his brother 11 years ago, is expected to clash again with his nephew over company management rights. A showdown over the election of some outside directors and audit committee members is anticipated at the shareholders' meeting scheduled for March. Due to the revised Commercial Act limiting the voting rights of Chairman Park and his son, Executive Director Park Jun-kyung, the management rights dispute could intensify depending on how much stake Executive Director Park Cheol-wan's allied faction holds. There are also criticisms that the amendment to the Commercial Act has triggered Kumho Petrochemical's management rights dispute after 11 years.

According to the Financial Supervisory Service's electronic disclosure on the 28th, Executive Director Park announced in a disclosure the day before that he would "dissolve the joint shareholding and special relationship with the existing representative reporter (Chairman Park)." Until now, Executive Director Park had been tied as a special relation with his uncle, Chairman Park, but he intends to break this and become the largest individual shareholder.

Executive Director Park made it clear that, as a shareholder, he can exercise rights under relevant laws such as appointing or dismissing directors and auditors, changing the company’s articles of incorporation, and mergers. Executive Director Park is the son of the late Park Jung-gu, former chairman of Kumho Group, and holds a 10% stake in the company. This is more than Chairman Park (6.7%) and cousin Executive Director Park (7.2%). It is reported that the shareholder proposal Executive Director Park sent to the company the day before included demands for director replacements.

Park Cheol-wan, Executive Director and nephew of Chairman Park Chan-gu.

Some outside directors who also serve as audit committee members have terms expiring by March. The industry views this as an attempt to appoint their own personnel to the board during the new director election process. The Commercial Act, which limits the voting rights of the largest shareholder and related parties to within 3% when electing audit committee members, will be applied starting from this year's shareholders' meeting, drawing attention to whether this will act as a variable in Kumho Petrochemical's management rights dispute and board member election process.

For outside director audit committee members, if the voting rights of related parties exceed 3% individually, they can be aggregated, making the extent of Executive Director Park's allied shares a key factor. There is speculation that the owner family of construction company IS Dongseo has gradually purchased shares of Kumho Petrochemical and may ally with Executive Director Park, but the exact scale of share purchases is unknown. If Executive Director Park has proposed dividend expansion, the National Pension Service (with a 7.9% stake), which was previously negative about Chairman Park's reappointment, is likely to side with Executive Director Park.

The possibility of another family management rights dispute within Kumho Group after more than 10 years is attributed to Executive Director Park stepping forward during the sale of Asiana Airlines. There were also rumors of a rift last year when Executive Director Park Jun-kyung, Chairman Park's son, was promoted in the group personnel reshuffle, while Executive Director Park Cheol-wan was not.

Within Kumho Group, there was a "brothers' conflict" in 2009 between Park Sam-gu, the third son of founder Park In-chun and former chairman of Kumho Asiana Group, and the fourth son, Chairman Park. In 2015, Kumho Asiana Group and Kumho Petrochemical Group were separated.