[At a Crossroads] Selvas AI③ CEO Gwak Min-cheol Took 2 Billion Won in 2 Years... Dividends Left Behind

CEO Gwak Min-cheol Received 984 Million KRW in Salary Last Year
Dividends Were '0 Won'... Neglecting Shareholder Value Enhancement

Recently, Selvas AI, which is conducting a 78.8 billion KRW rights offering, revealed that CEO Kwak Min-cheol received approximately 2 billion KRW in salary over the past two years. However, no dividends were paid to shareholders during the same period, raising concerns about neglecting shareholder value enhancement.

Mincheol Kwak, CEO of Selvas AI.

According to the Financial Supervisory Service's electronic disclosure on the 19th, Kwak Min-cheol, CEO of Selvas AI, received a total compensation of 984 million KRW last year. His base salary was 484 million KRW, and bonuses amounted to 500 million KRW. This accounts for 67% of the total compensation paid to registered directors of Selvas AI last year.

CEO Kwak's compensation is significantly higher compared to other AI company CEOs. CEOs of companies like Wise ITEC and Raon People, which recorded profits last year, earned less than 500 million KRW. The average compensation for inside directors at these companies is in the 100 million KRW range. Among companies such as Saltlux, Maum AI, and Konan Technology, whose stock prices rose alongside ChatGPT, none have CEOs earning over 500 million KRW annually. In the case of Naver, CEO Choi Soo-yeon received an annual salary of 1.1 billion KRW last year. CEO Kwak's salary is at a similar level.

Regarding CEO Kwak's bonus payment, Selvas AI stated, "The bonus was calculated considering the record-high sales, operating profit and net profit increases of 19% and 24% respectively, and the establishment of a timely and accurate decision-making system by applying the internal accounting management system after planning and developing the management control system."

CEO Kwak received a high salary not only last year but also in 2021. In 2021, his total compensation was 878 million KRW, with a base salary of 400 million KRW and bonuses of 478 million KRW. This represents a 21% increase in base salary within one year.

Previously, in March 2019, Selvas AI received a "qualified" opinion from an external auditor due to uncertainties about the subsidiary's going concern, resulting in a suspension of stock trading. A qualified audit opinion is grounds for delisting. Until then, Selvas AI had been running deficits for several years.

After implementing improvement plans and receiving an unqualified re-audit report, stock trading resumed in May 2020. Selvas AI, which continued to incur losses until 2020 after trading resumed, successfully turned around in 2021. Last year, it posted solid results with sales of 23.5 billion KRW and operating profit of 3.1 billion KRW.

Although Selvas AI recorded profits and paid CEO Kwak about 2 billion KRW in salary over two years, it never paid dividends to shareholders who had waited through long periods of trading suspension and losses.

Notably, last year, accumulated net income converted deficit into retained earnings for the first time. Retained earnings indicate a company's capacity to pay dividends. Selvas AI held about 2.9 billion KRW in retained earnings last year, meaning it was financially capable of paying dividends.

Nevertheless, CEO Kwak is believed to have chosen a high salary over dividends due to his low shareholding ratio. As of the end of last year, CEO Kwak held 11.82% of Selvas AI shares. Including his father, Kwak Young-soo, an advisor to Selvas AI, who holds 1.78%, their combined stake is about 13.6%. For CEO Kwak to receive 2 billion KRW as dividends, Selvas AI would need to pay approximately 15 billion KRW in total dividends. A Selvas AI representative said, "We are considering dividends and other measures to enhance shareholder value, but the exact timing is unknown."

Meanwhile, on the 7th, Selvas AI decided on a 78.8 billion KRW rights offering. Existing shareholders will be granted the right to purchase new shares at 19,710 KRW per share. As of the previous day, Selvas AI's closing price was 20,700 KRW.