Public Criticism in Commentary Released on the 21st
"Contributing treasury shares, which involve company funds, to a foundation without shareholder approval is clearly an act of shareholder value destruction, as it effectively issues new shares for free beyond low-price issuance."
The Korea Corporate Governance Forum issued a statement on the 21st, publicly criticizing HL Holdings' recent contribution of treasury shares to a foundation.
Earlier, HL Holdings, the parent company of Mando, resolved at a board meeting on the 11th to contribute 471,193 treasury shares, equivalent to 84% of the 560,720 treasury shares held in kind, to a newly established foundation free of charge. The company plans to cancel only the remaining 16%, or 90,527 treasury shares. When converted to cash, the approximately 470,000 treasury shares contributed free of charge to the foundation amount to 16.3 billion KRW based on the closing price on the 8th.
The forum stated, "The HL Holdings board's decision to dispose of treasury shares infringes on the interests of general shareholders, including the National Pension Service, individual investors, institutional investors, and foreigners," adding, "While fulfilling social responsibilities through a foundation is commendable, contributions should be made with funds from the founding family, not a listed company."
They also took a critical stance toward the outside directors who are supposed to check the major shareholders and management. The forum said, "We want to ask the four HL Holdings outside directors who approved the board agenda whether they sufficiently considered the infringement of general shareholders' interests from a fiduciary duty perspective."
Furthermore, "This board decision was made at a sensitive time amid amendments to the Commercial Act," and "Governance experts who emphasize global standards and investor protection reasonably suspect that some listed companies are attempting to secure friendly shares through free donations of treasury shares to foundations under the pretext of 'social contribution,'" the forum pointed out.
The forum also proposed the following to the HL Holdings board in line with the government's value-up policy and shareholder-centered management: ▲ nullify the treasury share disposal decision ▲ include a clause in the foundation's articles of incorporation permanently waiving the voting rights of treasury shares ▲ faithfully implement plans to enhance corporate value.
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