Despite National Pension Objections... Experts Support POSCO Post-Review Committee

National Pension Service Faces Fairness Concerns
"Meets Global Standards"
Experts Support Post-Review Committee

No Consensus Unlike KT Incident
20-30 Candidates to Be Announced Mid-Next Month
Final Candidate Confirmed Mid-February

Regarding the fairness issues pointed out by the major shareholder, the National Pension Service (NPS), in the selection of the next chairman (CEO) of the POSCO Group, experts generally tend to side with POSCO's position. Since POSCO Holdings has rebutted the NPS's criticisms, the confrontation between the two parties is likely to continue into the new year.

The fairness concerns raised by the NPS stem from bias within the board of directors. The CEO Candidate Recommendation Committee (CRC), composed of outside directors who were either recruited or reappointed under the Choi Jung-woo administration, is questioned on whether it can make independent and objective judgments without being influenced by Chairman Choi.

Choi Jung-woo, Chairman of POSCO Group. / Photo by Hyunmin Kim kimhyun81@

Experts have evaluated POSCO's CRC composition as "in line with global standards" and "reasonable." On the 31st, Moon Sung, a lawyer at Yulchon LLC, said, "The CRC is a committee within the board of directors, and committees within the board are composed solely of directors," adding, "Forming the CRC entirely with outside directors excluding inside directors also aligns with global standards."

Lawyer Moon stated, "The NPS has not judged the independence of outside directors based on 'who was present when they were appointed' when exercising voting rights, as it is difficult to objectively prove," and added, "According to guidelines, independence is presumed if there are no transactions or shareholding relationships with the company."

Professor Kim Woo-chan of Korea University also said, "Inside directors may have conflicts of interest, so it is appropriate to form the CRC with outside directors," and questioned, "If one insists that outside directors appointed during the tenure of the existing chairman should not be included, then which board of directors can appoint a CEO?" Regarding the NPS's claim that the chairman appointment process should be conducted publicly with a fair and transparent procedure, Professor Kim said, "This is not about electing a president or a member of the National Assembly, but selecting a corporate CEO," and added, "CEO appointments are not done publicly but are originally handled by the board of directors."

Kim Tae-hyun, Chairman of the National Pension Service, listening to questions at the National Assembly Health and Welfare Committee's audit on October 20. Chairman Kim recently stated, "The appointment process for the POSCO Holdings chairman should be conducted publicly based on fair and transparent standards and procedures," adding, "In light of the KT case, equal opportunities without discrimination between internal and external candidates must be provided to maximize shareholder value." Image source=Yonhap News

He commented on the fact that POSCO's stock price doubled during Chairman Choi's tenure, saying, "No American company conducts a public offering process to seek external candidates and compete when a CEO who has raised the stock price announces a bid for reappointment," and added, "If the CEO has excellent management skills and has boosted stock price and performance, it does not matter if they serve a third, fourth, or fifth term."

He further stated, "It is the NPS that is making statements not aligned with shareholder interests," and pointed out, "In the case of Hankook & Company (Hankook Tire), where the chairman is on trial for embezzlement and breach of trust and governance issues are more serious, it is contradictory that the stewardship code is not enforced."

Kim Nam-geun, chairman of the Reform Legislation Special Committee of the Lawyers for a Democratic Society (Minbyun), commented on comparisons between POSCO's CEO selection process and KT's case, saying, "In the KT incident, executives were heavily criticized for violating the Political Funds Act and the Anti-Corruption Act, and there was a broad consensus both inside and outside that corporate governance needed improvement due to the decline in corporate value," but added, "However, the NPS's current criticisms lack objective evaluation." He briefly said that the NPS's active raising of fairness issues with companies is "a welcome development."

Lawyer Kim noted, "Hyosung also faced major executive embezzlement and breach of trust issues, but the NPS did not take any measures such as demanding stronger board oversight, and the same applies to other companies fined for similar problems." He added, "If the NPS aims to improve governance and increase the value of invested companies as a steward managing public assets, it should act consistently rather than targeting specific companies."

Choi Jung-woo, Chairman of POSCO Group, visiting the construction site of the lithium extraction demo plant at the Argentine salt lake in October 2019 to encourage employees. Photo by POSCO

As experts support POSCO Group's position, it is increasingly likely that the existing procedures will be implemented despite the NPS's objections. Since the 29th, POSCO's CRC has started receiving recommendations for the next chairman from shareholders and 10 headhunting agencies including Search Pharma. After receiving recommendations until January 8 next year, a 'longlist' of 20 to 30 candidates will be publicly announced in mid-January. Through internal screening, a 'shortlist' will be created, and then narrowed down to about five 'finalists,' with the final candidate confirmed by mid-February next year.

The NPS is a major shareholder holding 6.71% of POSCO Holdings' shares. POSCO Holdings is an ownerless 'widely held company,' with minority shareholders holding 75.52% of shares.

Earlier, on the 19th, POSCO Group abolished the incumbent chairman's priority reappointment review system, which had been criticized for 'self reappointment' fairness issues. Along with this, the rule requiring the incumbent chairman to express their intention regarding reappointment 90 days before the shareholders' meeting was abolished, allowing Chairman Choi to be naturally included in the first candidate group of the CRC without declaring his intention to seek a third term. This led to criticism that the structure favors Chairman Choi's reappointment.