Why Chairman Choi Jung-woo Was Abandoned by the Yoon Administration [Business & Issues]

③ Choi Jung-woo, POSCO Chairman
Curious Rumors About His Failure to Secure a Third Term

Interest in who will sit at the top of the POSCO kingdom pyramid, ranked 5th in the business world, is stirring not only the economic and financial markets but also the political sphere. With Choi Jeong-woo, chairman of POSCO Group, virtually confirmed to have failed in securing a third term, interpretations are emerging that political influence played a role behind the scenes. As various suspicions of collusion between politics and business surrounding Chairman Choi surfaced, Kim Dae-gi, the presidential chief of staff who resigned last week, requested a police investigation, threatening to hold those spreading false information accountable.

Strong Candidate for Third Term Excluded from Internal Candidate List

POSCO Holdings, the group's holding company, held the 4th Chairman Candidate Recommendation Committee meeting on the 3rd and unanimously selected eight candidates for the next stage of 'reputation inquiry' through the first screening of internal candidates who submitted applications. Chairman Choi was not included. Until last month, Chairman Choi’s third term was considered a highly likely scenario.

Seemingly aware of the unfavorable views toward a third term, POSCO Holdings even amended the CEO chairman election regulations through its board to build justification for Chairman Choi’s third term. Although the priority screening system for incumbent chairmen’s reappointment was abolished to ensure fairness and transparency in the chairman election, Chairman Choi had already filled key positions with so-called 'allies' who could influence the chairman selection during his 5 years and 6 months in office, making a smooth third term possible without controversy.

Within POSCO, there was a general consensus accepting Chairman Choi’s third term as a foregone conclusion. Around this time, Chairman Choi also demonstrated his commitment to responsible management by purchasing 700 shares of POSCO Holdings on the open market. Generally, corporate executives sell their company shares upon retirement rather than buying more. It is quite rare for an executive to buy company shares just before stepping down.

The calm waters were disturbed by the largest shareholder (6.71% stake), the National Pension Service (NPS). Positioned to reflect the government’s stance, the NPS publicly voted against Chairman Choi’s reappointment. This was a method of openly raising issues with the POSCO chairman selection process, similar to what they had done previously with KT.

Why Was Chairman Choi Abandoned?

The NPS’s public criticism strongly pressured Chairman Choi, who had been subdued by government considerations as his term neared expiration. Kim Tae-hyun, chairman of the NPS, emphasized in several media interviews that POSCO is a widely held company (a company with dispersed ownership due to privatization, often called a 'company without an owner') and stated that the next chairman selection process should provide equal opportunities to both internal and external candidates to maximize shareholder value. This was effectively a public critique that the current POSCO chairman selection process is discriminatory and unfair to internal and external candidates alike.

Chairman Choi, who first took office in 2018 during the Moon Jae-in administration, differed from his predecessors who stepped down before completing their terms with each regime change. Although there were speculations that the POSCO chairman might change after President Yoon’s inauguration, Chairman Choi pushed to maintain his position with strong leadership. He was not only the first chairman to complete a full term after the 2000 privatization of POSCO despite a regime change but was also in a position to aim for a record-breaking third term.

As a result, Chairman Choi was tagged with the perception that he did not align with the Yoon Suk-yeol administration. Despite POSCO’s status as the 5th largest company in the business world, Chairman Choi was repeatedly excluded from President Yoon’s corporate-related schedules. During President Yoon’s overseas state visits to the United Arab Emirates and Switzerland in January last year, the United States in April, Vietnam in June, Poland in July, and Saudi Arabia and Qatar in October, Chairman Choi was not included in the accompanying business delegation. He also did not attend the '2024 Economic Community New Year Meeting' held on the 2nd of this month, following last year. The business community understood Chairman Choi’s absence from corporate gatherings as 'Choi Jeong-woo passing.'

Flood of Rumors Surrounding Chairman Choi

Former LG Energy Solution Vice Chairman Kwon Young-soo is considered the primary victim amid the flood of rumors surrounding Chairman Choi. Kwon stepped down from his vice chairman position during LG Group’s regular personnel reshuffle last November. Upon stepping down, he also sold all his LG Energy Solution shares as a measure of responsible management. The sale amounted to about 863 million KRW. Considering that the initial acquisition cost was close to 1 billion KRW, he incurred a loss of approximately 130 million KRW by selling all shares at once, which made the market view his retirement with suspicion.

However, Kwon has now become one of the leading external candidates likely to take the helm at POSCO after Chairman Choi’s departure. Meanwhile, rumors that angered former Chief of Staff Kim Dae-gi have spread rapidly, making him a victim of hearsay. The recent speculation about Kwon’s move to POSCO is spreading quickly in the form of rumors, suggesting that a certain 'collusive interest' between Chairman Choi and former Chief of Staff Kim Dae-gi is the reason.

Former Chief of Staff Kim requested a police investigation, threatening to hold those spreading false information accountable after related content circulated in information sheets (jirasi). Kwon, a battery expert who helped grow LG Energy Solution, has the experience to excel in POSCO’s developing secondary battery sector, but his relationship with former Chief Kim is currently receiving more attention. Some interpret that former Chief Kim, an alumnus of Kyunggi High School and Seoul National University like Kwon, put him forward to undermine Chairman Choi, who is not on good terms with the government.

Growing Controversy Over POSCO Chairman Position... Government Also Burdened Ahead of General Election

Unstable governance structures are among the biggest risk factors shareholders dislike. Shareholders’ greatest current concern is whether the various controversies surrounding the chairman selection will spread and lead to business instability. Especially last year, the secondary battery theme stimulated retail investors, raising expectations for POSCO’s secondary battery materials business. The foreign ownership ratio of POSCO Holdings, which once exceeded 50%, is now only about 27%. Meanwhile, the proportion of small shareholders increased to 75.5% as retail investors flocked in by the third quarter of last year.

The government cannot help but feel burdened by the frame that government influence is involved in POSCO’s chairman replacement. Since the chairman change is taking place ahead of the general election, if it leads to a stock price plunge, the government could face backlash blamed for it. Chairman Choi set the goal of 'tripling POSCO Holdings’ corporate value' at the launch of the holding company system in 2022, which shareholders welcomed. POSCO’s stock price soared from around 270,000 KRW at the beginning of last year to over 760,000 KRW in July, riding the secondary battery boom.