Minority Shareholders of Hyundai Mobis Subsidiary Are Angry

Hyundai Mobis Subsidiary 'GIT' Shareholders' Alliance
Strives to Block Articles Amendment and Elect Shareholder Audit Committee Members

[Asia Economy Reporter Hwang Junho] Minority shareholders of ‘GIT,’ a subsidiary of Hyundai Mobis, are upset. They have launched a shareholder movement to reject the appointment of an auditor and the amendment of the articles of incorporation, criticizing the disrupted KOSDAQ listing plan since the acquisition by Hyundai Mobis, stagnant growth, and unreasonable executive compensation.

The ‘GIT Shareholders Coalition’ announced on the 25th that it began electronic proxy voting to reject the amendment to the articles of incorporation at the general meeting of shareholders from 1:30 p.m. on the 22nd and secured more than one-third of the voting rights. Under the Commercial Act, GIT must secure at least two-thirds of the voting rights to amend the articles of incorporation. The shareholder composition of GIT is divided into Hyundai Mobis 45.87%, minority shareholders 25.57%, and Korea Development Bank 7.75%, among others.

On the 16th of this month, GIT included a proposal to change the existing single auditor system to an audit committee in the general meeting notice, and the coalition has completed preparations to block this. GIT proposed the amendment to prevent shareholders from appointing an auditor. This was a response after the coalition proposed the appointment of a shareholder auditor and an increase in dividend rates on the 11th of last month.

Shareholders proposed the appointment of an auditor, citing various management issues at GIT since Hyundai Mobis acquired it in 2016. Some shareholders have invested for over 20 years, hoping for GIT’s growth and KOSDAQ listing, but since the acquisition, GIT’s operating profit margin has dropped from 24% (2011?2016) to 17% (2017?2020), and return on equity (ROE) has fallen from the 21% range to the 10% range, indicating halted growth. The coalition explained, "There was a listing plan before Hyundai Mobis’ acquisition, but the plan disappeared afterward," and added, "We estimate that sales to Hyundai Mobis have decreased."

In this situation, CEO Joo Hyun of GIT received compensation of KRW 751 million, about 7.28% of the operating profit (KRW 10.2 billion in 2020). Although GIT is an unlisted subsidiary of Hyundai Mobis, CEO Seo Jeong-sik of Hyundai AutoEver, which has more than 17 times the number of employees and over 21 times the sales, receives less than KRW 500 million in compensation, making GIT’s CEO’s pay comparatively higher.

However, since GIT is conducting last-minute negotiations to prevent the coalition’s actions, it is uncertain whether the shareholder movement will actually proceed. The coalition stated, "What shareholders ultimately want is GIT’s listing (including a backdoor listing through a merger) or share buybacks," and added, "Whether to take actual action will be decided based on the outcome of future negotiations."