Truston, Taekwang Industry on 'Failed Shareholder Proposal': "Minority Shareholders' Rights Violated by Evasive Tactics"

At the Taekwang Industrial shareholders' meeting, all three shareholder proposals put forward by Truston Asset Management (hereinafter Truston), the second-largest shareholder (5.9%), including a stock split, a cash dividend of 10,000 KRW per share, and a share buyback, failed to pass.

On the 31st, Truston stated in a press release, "We will continue to monitor the management to enhance shareholder value at Taekwang Industrial and protect the rights of minority shareholders."

Truston explained, "To resolve the poor governance issues at Taekwang Industrial, we deemed it essential to appoint a fair audit committee member who is not biased toward the major shareholder. Therefore, at this shareholders' meeting, we planned to propose Jo In-sik, former acting CIO of the National Pension Service and a top expert in the financial market, as an audit committee member."

Regarding this, Truston said, "Taekwang Industrial nullified Truston's shareholder proposal with an outrageous trick. Last year, violating the Commercial Act, they appointed one audit committee member through separate election, resulting in two separately elected audit committee members. Using this as a shield, they rejected the shareholder proposal at this meeting, claiming that appointing separately elected audit committee members was unnecessary."

Truston argued, "The company appointed two separately elected audit committee members when it suited them, but when minority shareholders wanted it, they insisted that only one separately elected audit committee member should be appointed. Ultimately, they used the separate election system, which was introduced to protect minority shareholders' rights, as an outrageous loophole to infringe upon those rights."

They added, "The Ministry of Justice acknowledged the illegality of appointing two audit committee members through separate elections without amending the articles of incorporation last year, and the National Assembly is currently recognizing the seriousness of the issue and is moving toward revising related laws. Although Truston failed to appoint an internal monitor at this shareholders' meeting, we plan to continue monitoring activities from outside the company through legitimate shareholder rights such as inspecting and copying accounting books to enhance shareholder value."

Furthermore, Truston stated, "At next year's shareholders' meeting, when the terms of the separately elected audit committee members expire, we will definitely appoint outside directors who will represent minority shareholders' voices within the company and audit committee members who will prevent unilateral management by the executives. Along with this, we will also ensure the implementation of our demands to the company, including stock splits, increasing dividend payout ratios, improving asset management efficiency, and strengthening communication with the market."

Regarding the background of proposing a cash dividend of 10,000 KRW per share and a share buyback, Truston said, "Taekwang Industrial is one of the companies with the lowest shareholder returns among listed companies. The average dividend rate over the past two years is only 0.3%. This fact is clearly evident even when looking at the past 10 years."

Despite a cumulative net profit of 1.23 trillion KRW over the past 10 years, the amount paid to shareholders as dividends during the same period was only 15.1 billion KRW. The cumulative dividend payout ratio over 10 years is 1.23%. Considering that the average dividend payout ratio of KOSPI-listed companies in Korea is in the 20% range, Truston explained that this shows how stingy Taekwang Industrial is with dividends.

Regarding the reason for proposing a stock split, Truston said, "To resolve the low liquidity of Taekwang Industrial's shares, we proposed a 1-to-10 stock split at this shareholders' meeting. Taekwang Industrial's stock price is around 700,000 KRW, the second highest among all KOSPI-listed stocks, and its turnover rate ranks 268th out of 269 companies with a market capitalization over 1 trillion KRW."

Truston added, "The company has rejected the stock split demand, arguing that fractional trading can solve this problem and that a stock split does not change the intrinsic value of the company. However, anyone who has invested in stocks acknowledges that fractional trading alone is insufficient to resolve liquidity shortages."

Truston analyzed that among companies that have conducted stock splits since 2018, those with low liquidity and a monthly average turnover rate below 10 experienced an average increase of over 300% in turnover rate after the stock split.