Kumho Petrochemical "Reconfirms Overwhelming Support from Shareholders"... Increased Pressure on Park Cheol-wan (Comprehensive)

Shareholders' Proposal by Cha Partners Rejected by a Large Margin

Former Executive Director Park Cheol-wan of Kumho Petrochemical and the activist fund's shareholder proposals ended up as a 'mere ripple in a teacup.' Kumho Petrochemical, in response, secured overwhelming support from shareholders, gaining both legitimacy and practical benefits.

The burden on Park, the 'nephew' who continues the management dispute with Kumho Petrochemical Chairman Park Chan-gu, has also increased regarding his next moves.

Baek Jong-hoon, CEO of Kumho Petrochemical, is presiding over the 47th Annual General Meeting of Shareholders held on the 22nd at Signature Towers in Jung-gu, Seoul. (Provided by Kumho Petrochemical)

On the 22nd, Kumho Petrochemical held its 47th regular general shareholders' meeting at Signature Towers in Jung-gu, Seoul, addressing agenda items such as partial amendments to the articles of incorporation and the appointment of outside directors (audit committee members). Although the meeting was scheduled to start at 9 a.m., it began at 10 a.m. due to time taken for proxy verification and inspection.

As a result of the shareholders' meeting, all seven agenda items proposed by Kumho Petrochemical, including partial amendments to the articles of incorporation and the appointment of outside directors, were approved with overwhelming support from shareholders. The proposal to amend the articles of incorporation for the cancellation of treasury shares, proposed by Cha Partners Asset Management (Cha Partners), to whom former Executive Director Park delegated shareholder proposal rights, was rejected.

At the meeting, a block voting and multiple-vote system proposed by Cha Partners was applied, revealing the vote differences between both sides. Regarding the amendments to the articles of incorporation, the company's proposal received a 74.6% approval rate, while Cha Partners' shareholder proposal garnered only 25.6% support.

Accordingly, the proposal by Cha Partners to cancel all treasury shares was automatically discarded.

Additionally, the appointment of Choi Do-seon, the current president of Handong Global University, as an audit committee member (outside director) recommended by the company was approved. Cha Partners proposed Kim Kyung-ho, chairman of the KB Financial Group board, as an outside director, but he lost in the vote. The company's approval rate was 76.1%, while the shareholder proposal side received 23.0%, showing a significant gap.

Kumho Petrochemical stated, "We were able to confirm overwhelming results," adding, "This confirms that the debate over the voting method was a futile argument."

They continued, "Based on common shares (including shares absent from the meeting), excluding about 10% of shares held by former Executive Director Park, the approval rate for the shareholder proposals was about 4%, marking a crushing defeat for the shareholder proposal side," and pointed out, "General shareholders did not sympathize with the shareholder proposals lacking legitimacy, practicality, and sincerity, which gradually reflected fatigue."

Kumho Petrochemical held the 47th Annual General Meeting of Shareholders on the 22nd at Signature Towers in Jung-gu, Seoul, where they approved partial amendments to the articles of incorporation and the appointment of outside directors (audit committee members), among other agenda items. (Provided by Kumho Petrochemical)

Former Executive Director Park had attempted shareholder proposals twice in 2021 and 2022, but both ended in victories for Kumho Petrochemical. Last year, Park filed a lawsuit to invalidate the disposal of treasury shares, claiming that the exchange of treasury shares worth 31.5 billion KRW between Kumho Petrochemical and OCI Group during the establishment of a joint venture was intended to defend management rights, but he lost the case.

This year, too, the outcome was anticipated as global proxy advisory firms sided with Kumho Petrochemical ahead of the shareholders' meeting. Global proxy advisory firms ISS and Glass Lewis supported Chairman Park in the vote on the 22nd. The day before, the National Pension Service opposed the treasury share cancellation proposal and supported the company's recommended candidate Choi Do-seon for outside director, siding with Chairman Park.

A Kumho Petrochemical official said, "In the current critical situation faced by the petrochemical industry, the errors in the shareholder proposal, which could cause management instability by canceling future strategic resources all at once, were verified," and added, "We hope that instead of continuing the exhausting acts representing shareholder Park Cheol-wan's management dispute, efforts will focus on overcoming the recession, maximizing profitability, and genuinely enhancing shareholder value."

Meanwhile, former Executive Director Park is the largest individual shareholder of Kumho Petrochemical, holding 9.01% of shares. He has allies including his mother Kim Hyung-il (0.09%), father-in-law Heo Kyung-soo, chairman of Cosmo Chemical (0.06%), and sisters Park Eun-hyung, Eun-kyung, and Eun-hye (each 0.53%). Chairman Park holds 7.14%, his eldest son Park Jun-kyung, president, holds 7.65%, and his eldest daughter Park Ju-hyung, vice president, holds 1.04% of shares.