Sustinvest "Kumho Petrochemical Park Cheol-wan's Shareholders Meeting Agenda, '100% Support' Recommended"

Support for Park Cheolwan's proposals including dividend plan, appointment of 2 outside directors, and appointment of 1 audit committee member

[Asia Economy Reporter Minji Lee] Sustainvest, a major domestic proxy advisory firm and ESG advisory institution, announced on the 21st that it supported all items proposed at the Kumho Petrochemical shareholders' meeting on the 25th, including all proposals by the largest shareholder, Park Cheol-wan.

In its analysis report on the Kumho Petrochemical shareholders' meeting agenda, titled ‘Proxy Advisory Report,’ Sustainvest recommended voting in favor of all proposals put forward by Park Cheol-wan, the largest individual shareholder and former executive director, including ▲dividend proposal ▲appointment of outside director Lee Seong-yong ▲appointment of outside director Ham Sang-moon ▲appointment of audit committee member Lee Seong-yong.

Sustainvest specifically cited reasons for recommending opposition to the proposals made by Kumho Petrochemical, including ▲a board of directors lacking independence ▲a board neglectful of protecting shareholders' proportional interests.

Sustainvest pointed out the issues, stating, “Chairman Park Chan-gu was finally sentenced by the Supreme Court in 2018 to three years in prison with a five-year probation, and despite receiving a work restriction notice from the Ministry of Justice in May 2019, he still maintains his position as chairman (non-registered executive) of Kumho Petrochemical. Although all board candidates recommended by the board side were appointed at last year’s regular shareholders' meeting, changing half of the board members, the fact that Chairman Park Chan-gu is still not excluded from management clearly demonstrates the difficulties in improving the board’s independence with the board-recommended candidates.”

They also noted, “Despite the company demonstrating superior profitability compared to peers in recent years, the reason it continues to be undervalued is still due to the high ratio of treasury stock.” When a large amount of treasury stock is held for a long period, market participants perceive it as a tool for the controlling shareholder to appropriate private benefits (strengthening control and defending management rights). The report stated, “It is obvious that to enhance the interests of all shareholders rather than just the controlling shareholder, a large amount of treasury stock should be actively retired. The continued neglect of this issue proves that the board-recommended candidates have clear limitations in protecting shareholders’ proportional interests.”

Sustainvest fundamentally identified the current board composition’s lack of independent outside directors as a problem and judged that the director candidates recommended by the largest shareholder, Park Cheol-wan, are more suitable from the perspective of independence. They also supported Park Cheol-wan’s dividend proposal, warning that the relatively low dividend policy compared to peers could harm shareholder value.

In response, the largest shareholder Park Cheol-wan said, “I am pleased that the shareholder proposal presenting the direction for change at Kumho Petrochemical is widely supported,” adding, “Through the campaign process, communicating with various domestic and international shareholders has strengthened my resolve to continuously strive for long-term corporate value enhancement.”