"Missing the Investment Golden Time" vs "Just the Second Choi Jeong-woo"... POSCO Chairman Candidates' 'Insider vs Outsider' Debate

Final Candidate Group of Around 5 Announced on the 31st

As the candidate selection process for the next chairman of the POSCO Group reaches its final stages, a clear contest between 'insiders and outsiders' is emerging. Within POSCO, there is growing support for the need for a steel industry expert, while there is also considerable advocacy for selecting an outsider to usher in a 'new era.' This issue is expected to be a hot topic during the candidates' interviews scheduled for next month.

The POSCO Holdings CEO Candidate Recommendation Committee will hold its 8th meeting on the 31st to narrow down 12 candidates?5 insiders and 7 outsiders?to around 5 finalists. Among the insiders are Kim Hak-dong, Vice Chairman of POSCO; Jeong Tak, Vice Chairman of POSCO International; Jeong Gi-seop, President of POSCO Holdings; and Hwang Eun-yeon, former head of POSCO Talent Creation Center. Key external candidates include Kwon Young-soo, former Vice Chairman of LG Energy Solution; Choi Joong-kyung, former Minister of Knowledge Economy; and Yoon Sang-jik, former Minister of Trade, Industry and Energy.

Insiders Play a Major Role as Steel Experts Amid Carbon Neutrality Changes... Rapid Organizational Stabilization

The strongest argument for selecting an insider as the final candidate is that the POSCO Group remains steel-centric. As of Q3 last year, POSCO Holdings posted an operating profit of 1.196 trillion KRW on a consolidated basis. Of this, the steel division accounted for 853 billion KRW in profit. Simply put, this represents a 71.3% share.

The global steel industry continues to struggle due to the economic downturn. Steel companies facing survival crises are attempting unprecedented changes. Nippon Steel, ranked 4th worldwide in crude steel production (44.37 million tons), is on the verge of acquiring US Steel (14.49 million tons), a symbol of American industrialization. China’s Baowu Steel Group (103.1 million tons), the world’s largest steel producer, is pursuing a growth strategy through a merger with the 7th-ranked Shandong Steel Group (29.4 million tons).

POSCO Group, ranked 7th (32.14 million tons), also stands at a crossroads. To expand its share in the Chinese automotive steel market, it is preparing to complete the second plant of the joint venture 'Hagang Pohang' with Hebei Steel in China this May. It will soon face competition with local companies. The domestic market also faces concerns over profitability deterioration due to oversupply caused by inexpensive imports from China and Japan. An industry insider said, "If someone unfamiliar with steel comes in, many on the ground may feel alienated," adding, "The labor union, which has not yet reacted strongly, is likely to resist significantly."

Carbon neutrality in steelmaking also demands high expertise. Among domestic steel companies, POSCO emits the most greenhouse gases and on the 26th opened a Hydrogen Reduction Steelmaking Development Center at its Pohang Steelworks. The success or failure of hydrogen reduction steelmaking, which uses hydrogen instead of carbon, will be decided within the next few years. There are concerns that if someone unfamiliar with steel takes over, the 'golden time' for investment could be missed.

Another advantage of an insider is the ability to quickly stabilize the organization. In addition to the 'luxury business trip' controversy revealed during this candidate selection process, adjustments to the current Chairman Choi Jeong-woo’s regime, known as the 'Choi Jeong-woo line,' are inevitable. It is generally believed that an insider is better suited to mediate conflicts and persuade stakeholders to focus on management activities.

External Business Leaders Bring Diverse Industry Insight and Leadership... Crucial Role in Resolving Community Conflicts

On the other hand, there is considerable opinion that an outsider should take the chairman position to bring about change. In 2022, POSCO Group sent an email to employees stating, "POSCO Group is not a national enterprise." Although the group declared its rebirth as a private company with the launch of the holding company system, it faced criticism for denying its half-century history that began with the Japan Claims Settlement Fund. At that time, complaints also arose from upstream industries such as shipbuilding, automotive, and construction that POSCO was only looking out for its own interests.

Business circles believe that if an insider becomes the new chairman, this stance will not change. They argue that only an outsider can bring genuine change. A steel industry insider expressed concern, saying, "The POSCO internal candidates currently being discussed are all people who were part of the current Choi Jeong-woo regime," adding, "They will inevitably become a second Choi Jeong-woo."

[Image source=Yonhap News]

POSCO Group’s transition into an eco-friendly future materials company is also cited as a reason for needing an outsider. The group’s business structure is changing to encompass eco-friendly sectors including lithium, nickel, and other raw materials and materials for secondary batteries, as well as energy and hydrogen businesses. The need to collaborate with various industries will increase. The insight and leadership of an external executive with broad experience and a deep understanding of the industrial ecosystem could be a strong advantage.

There are also claims that an outsider could play a decisive role in resolving long-standing community conflicts. When POSCO announced last year that it would establish its holding company in Seoul, citizens of Pohang held rallies demanding Chairman Choi’s resignation. Lim Jong-baek, co-executive director of the Pohang Citizens’ Countermeasure Committee for the Relocation of POSCO Holdings and the Future Technology Research Institute, said, "If an insider is selected, they will simply follow Chairman Choi Jeong-woo’s management style."