Passed Appointment of President by Plurality Vote in Concentrated Voting System
IBK Recommended Director Joins Amidst Confrontation
Board Demands Independence, Governance, and Performance Improvements
Tense Relations Expected to Continue in Management Activities
KT&G has appointed internal candidate Bang Kyung-man as president, welcoming a new leader for the first time in nine years. Initially, the company aimed to reorganize the board of directors through proposed internal and external director candidates, but this effort ended in partial success. With an external director recommended by IBK Industrial Bank, which has taken a confrontational stance against the former and current management, joining the board, a tense relationship is expected to continue.
On the 28th, KT&G held the 37th regular shareholders' meeting at the Talent Development Center of its headquarters in Daedeok-gu, Daejeon Metropolitan City, and passed the agenda to appoint candidate Bang as the new president. Bang secured 84,097,688 votes as the top candidate in the cumulative voting system, which appoints the top two among three candidates, including two external director candidates, as internal and external directors.
Son Dong-hwan, a candidate recommended by IBK Industrial Bank, the largest single shareholder holding 7.11% of KT&G shares and a professor at Sungkyunkwan University Law School, ranked second with 56,603,958 votes and joined as a new external director. This marks the first time in 18 years since 2006 that an external director recommended from outside has entered the KT&G board. Lim Min-gyu, chairman of the KT&G board (CEO of LMK Consulting), who ran as an external director candidate recommended by the KT&G board, received only 24,505,618 votes.
Bang Kyung-man, the new CEO and President of KT&G (second from the right), is attending the KT&G regular shareholders' meeting held on the 28th at the Talent Development Center at the headquarters in Daedeok-gu, Daejeon. [Photo by KT&G] [Image source=Yonhap News]
During the election process, newly appointed President Bang faced opposition from IBK Industrial Bank and activist fund 'Flashlight Capital Partners (FCP)'. The opposition mainly raised issues related to performance and governance. On the 12th, IBK Industrial Bank explained the background of recommending candidate Son through a 'proxy voting solicitation,' emphasizing, "All six external directors of KT&G are individuals recommended by the company, and there are no shareholder-recommended external directors," adding, "For companies with dispersed ownership, the role and checks and balances of the board of directors are very important, so it is necessary to secure the independence of the board and form a board that represents shareholders' opinions."
With Professor Son's entry as an external director, there is a high likelihood that demands for governance improvements through strengthening the board's expertise and independence will arise first. Professor Son, a former judge, is an expert in economic law, fair trade law, and commercial law, having served as a Supreme Court judicial research officer (in charge of fair trade) and a judge at the Seoul High Court (fair trade division).
Previously, KT&G faced criticism over suspicions of securing friendly shares using treasury stock and controversies over external directors' overseas business trips, raising questions about the board's independence and fairness. FCP, which raised these suspicions and fielded an external director candidate, also announced its support for the candidate recommended by IBK Industrial Bank after withdrawing its own candidate. Additionally, monitoring of whether KT&G's management activities, as a market-dominant business, involve any illegal situations may be strengthened compared to before.
Demands for profitability improvement and shareholder interests are also expected to increase. KT&G's consolidated sales last year reached 5.8626 trillion won, slightly up from 5.8514 trillion won the previous year, setting a record high, but operating profit decreased by about 8% to 1.1673 trillion won during the same period. The company's operating profit has been declining for four consecutive years since 2020. KT&G's stock price has also shown a downward trend over the past several years, causing dissatisfaction among shareholders. Therefore, there is speculation that President Bang will strengthen shareholder return policies after taking office.
There are also voices expressing concern about appointing an external director and the resulting interference in management by the largest shareholder. Dozens of members of the National Tobacco Workers' Union, the sole labor union at KT&G, protested at the shareholders' meeting site, condemning IBK Industrial Bank's attempt at government control. In an official statement, the union said, "The tobacco and ginseng industry requires management expertise and stability," and added, "We cannot tolerate the increasing concerns over employment stability being undermined by activist funds aiming for short-term performance and profits and excessive interference by the largest shareholder seeking to seize management rights."
They also stated, "If we tolerate the unreasonable actions of private equity funds pursuing only short-term performance and profits, cases like Carl Icahn's 18 years ago will happen again," urging, "The largest shareholder and private equity funds must immediately withdraw their irresponsible shareholder proposals and unreasonable actions." Previously, KT&G was embroiled in a management dispute with American hedge fund Carl Icahn in 2006. At that time, the Carl Icahn coalition secured a 6.6% stake in KT&G, becoming the second-largest shareholder, and earned about 150 billion won in capital gains before exiting.
Meanwhile, President Bang presented 'T·O·P' as his inaugural slogan. T·O·P stands for Trust, Origin, and Professionalism. It is a management strategy to enhance stakeholders' trust through active communication, secure fundamental competitiveness as a 'first mover,' and strengthen global expertise for performance and growth. He urged employees, saying, "We will increase the company's value and build stronger trust with various stakeholders, including shareholders," and added, "Based on a successful history of overcoming numerous crises and growing, let us repeatedly attempt fresh and bold initiatives to create a new legend."
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