Cho Hyun-sik, CEO of Hankook & Company
Park Cheol-wan, Executive Director of Kumho Petrochemical
Bringing out shareholder proposal card
[Asia Economy Reporter Ki-min Lee] Concerns that the amendment to the Commercial Act, which includes the separate appointment of audit committee members, the 3% rule, and the expansion of the scope of shareholder proposals, would be used as a tool in management rights disputes have materialized.
According to industry and legal circles on the 25th, in the recent management rights disputes at Hankook & Company (the new name of the Hankook Tire & Technology Group) and Kumho Petrochemical, CEO Cho Hyun-sik and Executive Director Park Cheol-wan’s sides have pulled out the ‘shareholder proposal’ card utilizing the separate appointment of audit committee members. A shareholder proposal means that a shareholder holding shares equivalent to at least 3% of the total issued shares excluding non-voting shares proposes in writing at least six weeks before the general shareholders' meeting to include certain matters as agenda items for the meeting. Under the amended Commercial Act, the six-month shareholding restriction for making shareholder proposals has been removed. Furthermore, when electing audit committee members who also serve as outside directors, the 3% voting rights restriction applies individually without aggregating the shares of the largest shareholder and related parties.
First, CEO Cho, who is losing to his younger brother, President Cho Hyun-beom, who holds 42.90% of Hankook & Company’s shares, has formalized a shareholder proposal. The intention is to resign from the CEO position if Professor Lee Han-sang of Korea University is appointed as an outside director and audit committee member. The rationale is to fundamentally cut off the chain of controversies over management rights disputes that could damage the company’s reputation. However, the industry views that since CEO Cho did not mention the possibility of resigning from the vice chairman position and the chairmanship of the board, nor the withdrawal of the limited guardianship commencement trial against Chairman Cho Yang-rae, there is a high possibility that the conflict will reignite.
In the case of the Kumho Petrochemical management rights dispute, known as the ‘nephew’s rebellion,’ Executive Director Park, nephew of Chairman Park Chan-gu, delivered a shareholder proposal last month that included his nomination as an inside director, recommendations for outside directors and auditors, and dividend expansion. Currently, Executive Director Park holds 10.00% of Kumho Petrochemical shares, making him the largest shareholder. However, when combining Chairman Park’s 6.69%, his son Executive Director Park Jun-kyung’s 7.17%, and daughter Executive Director Park Ju-hyung’s 0.98%, their combined shares total 14.84%, which is 4.84 percentage points higher than Executive Director Park’s holdings.
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