[Exclusive] 'Harim 2nd Generation' Kim Jun-young Appointed Non-Executive Director Without Board Resolution

Appointed as Inside Director at March General Meeting
Board Should Have Decided Work Allocation
Serving as Non-Executive Amid Procedural Flaws
Legal Expert: "Audit Team Needs to Investigate"
Industry Raises Concerns Over Illicit Succession of Management Rights

It was confirmed on the 18th that Junyoung Kim (31), the eldest son of Harim Group Chairman Kim Hong-guk, has been serving as a non-executive inside director at NS Shopping, the group's key affiliate, without board approval. This behavior violates the board operation manual, and the company plans to hold a board meeting soon to discuss this issue.

Kim Jun-young, the eldest son of Kim Hong-guk, Chairman of Harim Group, was appointed as an inside director of NS Shopping last March.

Non-executive Director Serving... Procedural Flaws Exist

According to our investigation, since being appointed as an inside director of NS Shopping, which operates NS Home Shopping, on March 28, Junyoung has been serving as a non-executive director without holding any internal position to date. Typically, when a new director is appointed at a shareholders' meeting, the board must decide on matters such as whether the new director will be full-time, their division of duties, and compensation. These procedures are also included in NS Shopping's board operation manual. However, Junyoung appears to have taken on the director position as a non-executive without following these procedures.

The company plans to decide on Junyoung's full-time status through board approval soon. However, since there was an implicit agreement from the shareholders' meeting stage that Junyoung, as the largest shareholder, would only participate in board decision-making, it is likely that he will be approved as a non-executive director.

Even if Junyoung's continued service as a non-executive inside director is confirmed at the board meeting, his work behavior so far, stemming from procedural flaws, is expected to escalate into attendance issues. Since he was not appointed as a non-executive inside director at the shareholders' meeting, he should have attended work as a full-time inside director until board approval, but he did not. Legal expert Won Jong-chae said, "An inside director is someone who works on the company's premises," adding, "This is a clear case of unauthorized absence, and the company's audit team should conduct an audit and take corrective measures accordingly."

Junyoung's appointment as an inside director is known to have been heavily influenced by his father Chairman Kim's resignation from the director position. Chairman Kim had served as an inside director of NS Shopping, a key distribution affiliate of the group, since 2005 and retired on March 28, the same day Junyoung was appointed. Since then, NS Shopping has been reorganized under a two-person system with CEO Cho Hang-mok and Director Kim Junyoung.

NS Home Shopping building view in Pangyo, Seongnam, Gyeonggi

Renewed Suspicions of Illicit Succession of Management Rights

Within the industry, there is strong skepticism about the father-son succession of director positions, viewing it as an illicit succession of management rights. An industry insider said, "Last year, NS Shopping's governance structure was reorganized, making changes to the shareholding structure inevitable. As part of that process, the largest shareholder, Chairman Kim's eldest son Junyoung, was incorporated as a director."

Previously, Harim Holdings completed a spin-off by incorporating NS Shopping as a 100% subsidiary through a share exchange among shareholders, splitting it into an investment company (NS Holdings) and an operating company (NS Shopping). Following the governance restructuring, NS Shopping was delisted from the KOSPI.

Currently, the largest shareholder of Harim Holdings is Chairman Kim, holding 21.1% of shares. Next are Korea Biotech with 16.69% and Olpum with 5.78%. However, Olpum is a company wholly owned by Junyoung, who also holds all shares of Korea Biotech. With NS Shopping incorporated as a subsidiary, Junyoung has effectively become the top controller of Harim Holdings.

Suspicions of illicit succession of management rights surrounding the Harim family have been continuously raised since Chairman Kim gifted Olpum shares to Junyoung. The core allegation is that Chairman Kim cleverly evaded legal scrutiny when transferring 100% of Olpum shares, which were at the top of the group's governance structure, to Junyoung in January 2012. Subsequently, a 2021 Fair Trade Commission investigation revealed that Harim affiliates, under the involvement of Chairman Kim and the group headquarters, provided economic benefits to Olpum through preferential purchasing and overpriced acquisitions, intensifying related suspicions.

In December of the same year, the Kim family was also investigated by the police following a citizen group's complaint based on the Fair Trade Commission's findings. The allegations against the Kim family included breach of trust, claiming that Harim Group affiliates caused losses to the company by unfairly supporting Olpum. However, this complaint case was closed last year when the police decided not to prosecute.