CEO Score "Resolution of Circular Shareholding in Top 30 Groups Except Hyundai Motor"
[Asia Economy Reporter Moon Chaeseok] Among the top 30 companies, including Lotte, HD Hyundai (formerly Hyundai Heavy Industries Group), Hanjin, and Hyosung, seven have transitioned to a holding company structure over the past decade. The number increased from eight to fifteen in ten years, and most large corporations, except Hyundai Motor Group, have resolved issues related to circular shareholding.
On the 11th, the Corporate Data Research Institute CEO Score released data on changes in corporate governance among large corporations. The study examined 25 of the top 30 conglomerates that have a controlling shareholder.
SK, LG, GS, CJ, Doosan, LS, Booyoung, and Harim had established holding company structures by the end of 2012. Over the past decade, Lotte, HD Hyundai, Hanjin, DL, Kumho Asiana, HDC, and Hyosung have been added.
Jungheung Construction plans to transition to a holding company centered on Jungheung Togeon, which is 100% owned by Vice Chairman Jung Wonju. Hyundai Department Store is also pursuing a plan to spin off Hyundai Department Store and Hyundai Green Food to convert into a holding company.
Some companies simplified their governance structures even after establishing a holding company framework. In 2015, SK merged its existing holding company, SK Corporation, with its controlling company SK C&C (now SK Inc.), changing the structure so that Chairman Chey Tae-won’s family directly controls the holding company.
Harim Group also merged its holding company Jeil Holdings (now Harim Holdings) with its intermediate holding company Harim Holdings. Last year, it incorporated NS Shopping, an intermediate holding company, as a 100% subsidiary through a stock swap and merged after splitting the investment business division.
HD Hyundai created a new intermediate holding company and vertically integrated its governance structure by business division.
Notably, most major domestic groups have escaped the 'chronic disease' of circular shareholding structures.
Over the past decade, 11 companies including Samsung, Hyundai Motor, Lotte, HD Hyundai, Hanjin, DL, Jungheung Construction, Hyundai Department Store, Kumho Asiana, HDC, and Youngpoong were in a chronic circular shareholding state. By the end of last year, all groups except Hyundai Motor Group had resolved this issue.
Since the amendment of the Fair Trade Act in July 2014, disclosure of circular shareholding status has been mandatory. At that time, the circular shareholding loops were: Samsung 14, Hyundai Motor 6, Lotte 417, HD Hyundai 1, Hanjin 8, DL 1, Hyundai Department Store 3, Kumho Asiana 1, HDC 4, and Youngpoong 7. Jungheung Construction had no circular shareholding but had one as of May 2018, which was resolved by the end of last year.
Hyundai Motor Group attempted to resolve circular shareholding through the spin-off and merger of Hyundai Mobis and Hyundai Glovis in 2018, but the plan was scrapped due to opposition from domestic and international proxy advisory firms.
In the past decade, third-generation owners have actively acquired shares in key affiliates. Chung Eui-sun, Chairman of Hyundai Motor Group, sold about 4.45 million shares of Hyundai Glovis for 943.6 billion KRW and purchased Hyundai Motor shares worth 840.6 billion KRW and Hyundai Mobis shares worth 41.1 billion KRW. Jung Ki-sun, President and CEO of HD Hyundai, also purchased about 830,000 shares of HD Hyundai from KCC for 354 billion KRW in 2018.
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