[Construction Zero Hour] "The Way to Survive is Securing Liquidity" Top Priority Financial Sector Outside Directors

Strengthening Financial Risk Management
Continued Recruitment of Former Government Officials
Efforts to Secure New Revenue Sources

As the construction industry continues to face a severe downturn, companies are actively recruiting financial or accounting experts and former government officials as outside directors. This move is analyzed as a measure to enhance liquidity and risk management capabilities.

◆Mass Appointment of Financial and Accounting Experts... Securing Financial Soundness= According to the shareholder meeting convening resolutions posted on the Financial Supervisory Service's electronic disclosure system on the 10th, the top priority for outside directors at major construction companies is financial or accounting experts.

Kolon Global plans to propose the appointment of Jeong Yeon-gi, a financial supervisory advisor at the Financial Supervisory Service, as a new outside director at the regular shareholders' meeting scheduled for the 26th. Including the newly appointed Jeong, Kolon Global has filled three out of five outside director positions with individuals from the financial sector, reaching a 60% ratio of financial experts. Jeong, who has spent 30 years in finance, previously served as Executive Vice President of the SME Group at Woori Bank and CEO of Woori Financial Capital. The existing outside directors, Lee Hu-seung and Lim Young-ho, are from Hana Financial Group and have served as CEOs of Hana Alternative Asset Management and Hana Life Insurance, respectively.

GS Engineering & Construction will appoint Jeong Seok-woo, a professor of accounting at Korea University, as a new outside director at the shareholders' meeting on the 25th. He concurrently serves as an outside director at KB Securities and SK Networks. Jeong is a financial and accounting expert who has held positions such as president of the Korean Accounting Association, non-standing commissioner of the Securities and Futures Commission, and outside director of Samsung Biologics.

Kumho Construction will reappoint outside director Jeong Ji-hoon at the same shareholders' meeting. Jeong previously served as director of the Global Corporate Finance Department at SC First Bank (formerly Standard Chartered Bank Korea) and currently leads Aurum Consulting & Advisory. Yang Se-jung, an outside director to be reappointed by Taeyoung Construction at the shareholders' meeting on the 27th, is a professor in the Department of Economics and Finance at Sangmyung University and is recognized as an expert in finance and economics.

A construction site in downtown Seoul. Photo by Yonhap News

◆Recruitment of Former High-Ranking Officials... Strengthening Policy Response= Former high-ranking officials and individuals from public institutions are also being recruited as outside directors. Following Jeong Seok-woo, GS Engineering & Construction plans to appoint Son Byung-seok, former Vice Minister of the Ministry of Land, Infrastructure and Transport, as a new outside director. Son served as Director of the Planning and Coordination Office at the Ministry of Land, Infrastructure and Transport, standing member of the Central Land Acquisition Committee, and also as president of Korea Railroad Corporation. With a deep understanding of government policies and infrastructure projects, he is expected to play a crucial role in responding to future construction and real estate regulations.

HJ Heavy Industries will recruit a new outside director with extensive experience in local finance and administration at its shareholders' meeting on the 28th. Lee In-jae, former Director of the Planning and Coordination Office at the Ministry of the Interior and Safety (acting Vice Minister), has built a career in administration and finance as director of the Local Autonomy Human Resources Development Institute and chairman of the Korea Local Finance Association. Dongbu Construction will reappoint Baek Kyu-seok, adjunct professor in the Department of Civil and Environmental Engineering at Yonsei University, as an outside director at the shareholders' meeting on the 26th to strengthen environmental and regulatory responses. Baek previously chaired the Audit Committee of Korea Water Resources Corporation and currently serves as a member of the Presidential Committee on National Water Management and the Ministry of Environment's Self-Regulatory Review Committee. The industry interprets these appointments as preparations for strengthened ESG and environmental regulations.

HanmiGlobal plans to recruit an individual with corporate management experience for risk management at its shareholders' meeting on the 21st. The company explained the nomination of Hwang Gak-gyu, former Vice Chairman and CEO of Lotte Holdings, as an outside director by stating, "As a professional manager with extensive corporate management experience and strategic planning capabilities, he will contribute to the company's management risk control."

Experts analyze that the trend of appointing outside directors in the construction industry is linked to securing financial soundness. Oh Il-seon, director of the Korea CXO Research Institute specializing in corporate analysis, explained, "Outside directors are generally limited to former bureaucrats, academia, legal professionals, and business circles, and companies tend to appoint appropriate experts according to their immediate issues." He added, "As liquidity deteriorates across the construction industry and bank loans become difficult, outside directors from the financial sector can proactively manage risks and propose solutions to liquidity problems."

Meanwhile, construction companies are also exploring new businesses to overcome liquidity crises. Samsung C&T plans to add hydrogen power generation and related ancillary businesses, as well as telecommunication sales brokerage, to its business objectives at the shareholders' meeting on the 14th. Hyundai Engineering & Construction will newly include the hydrogen energy business at its shareholders' meeting on the 20th. GS Engineering & Construction plans to add telecommunication sales with an eye on expanding its modular housing business. As the improvement of the construction market is delayed, these moves are interpreted as strategies to secure new revenue sources through business diversification.