Alline Proposes to Coway 'Introduction of Cumulative Voting System and Appointment of Outside Directors' in Shareholder Proposal

Activist fund Align Partners (Align) announced on the 6th that it has sent a shareholder proposal to the Coway board of directors to submit agenda items, including the introduction of a cumulative voting system, for the upcoming regular shareholders' meeting in March.

On the same day, Align stated, "Last month, we publicly inquired about six matters urging Coway to improve capital structure efficiency and board independence, but Coway's response on the 3rd, the deadline for replies, contained no answers to our questions at all.

Align pointed out governance issues where Netmarble, holding a 25% stake, exerts excessive influence, and proposed an amendment to the articles of incorporation to introduce a cumulative voting system. They emphasized, "The introduction of a cumulative voting system is one of the 15 key governance indicators selected by the Korea Exchange and is recommended to protect minority shareholders and enhance management transparency," adding, "It is also recommended by prominent domestic and international institutional investors and proxy advisory firms."

The cumulative voting system grants each shareholder voting rights equal to the number of directors to be appointed per share and elects all directors simultaneously by the highest number of votes. Through this, minority shareholders can concentrate their voting rights on minority director candidates, increasing their chances of entering the board.

In addition, Align submitted shareholder proposals to increase the number of directors to eight and to appoint Namwoo Lee, chairman of the Korea Corporate Governance Forum (visiting professor at Yonsei University Graduate School of International Studies), as an outside director. Chairman Namwoo Lee is a global finance expert who has held senior executive positions at JP Morgan, Merrill Lynch, and Nomura Securities. Align explained that if he is appointed, the Coway board can act independently from the largest shareholder Netmarble and faithfully make decisions for all shareholders.

Shareholder proposals related to shareholder returns and capital allocation policies are not planned for this regular general meeting. An Align official stated, "Coway mentioned in its response that the corporate value enhancement plan to be announced in the first quarter may include answers to the public shareholder letter. We urge the prompt announcement of the related plan." However, if the value-up plan does not include a shareholder value enhancement measure at a reasonable level, Align intends to take additional actions as a shareholder.

The detailed contents of the shareholder proposal sent by Align to the Coway board can be found on the Coway page of the shareholder platform Beside Korea.

Earlier, Align, holding a 2.843% stake in Coway, sent a public shareholder letter to Coway on the 16th of last month, stating that "shareholder value has been significantly damaged since Netmarble's acquisition." At that time, Align CEO Changhwan Lee pointed out, "The core reason for Coway's undervaluation is the sharp reduction in shareholder returns immediately after Netmarble's acquisition of shares," adding, "The shareholder return ratio shrank from an average of 91% during the MBK era to around 20% after Netmarble's acquisition."