Governance Forum Says "LG Chem Must Reannounce Value-Up Plan and Change Board Composition to Reflect Shareholder Interests"

Korea Corporate Governance Forum Issues Statement
"Welcomes Palliser's Shareholder Proposal"
Seven Demands to Enhance Shareholder Interests

The Korea Corporate Governance Forum pointed out that LG Chem needs to completely reexamine its Value-Up plan and change its board composition, which is currently centered on university professors, so that it takes into account the interests of all shareholders. This move comes in response to a shareholder proposal that the UK-based activist fund Palliser Capital sent to LG Chem.

Lee Namwoo, professor at Yonsei University's Graduate School of International Studies and chairman of the Korea Corporate Governance Forum, is being interviewed on the 6th at Align Partners in Yeouido, Seoul. Photo by Kang Jinhyung

On the 23rd, Lee Namwoo, chairman of the Korea Corporate Governance Forum, said, "Ahead of LG Chem's regular shareholders' meeting next month, we welcome Palliser's submission on the 10th of a shareholder proposal aimed at addressing the undervaluation of the share price and improving governance, including quarterly disclosure of the net asset value (NAV) discount rate, normalization of capital allocation such as share repurchases and cancellations using LG Energy Solution shares, and other measures to rationalize capital allocation," adding, "The Forum is going further and is demanding seven measures to enhance corporate value."

He went on, "Due to the spin-off and listing of LG Energy Solution and the deepening losses in the petrochemical segment, LG Chem's common share price has plummeted 65% over the past five years," while adding, "It is shocking that Palliser, despite being a major shareholder, has repeatedly been denied meetings with the chairman of the board and the CEO."

Lee first stressed that the Value-Up plan needs to be reconsidered from square one. He said, "The board of directors must swiftly announce a revised plan that includes a concrete action plan," pointing out that "the plan announced at the end of 2024 is inadequate because it omits even the minimum essentials, such as the cost of capital and principles of capital allocation."

He stated that the Board Committee on Reducing the NAV Discount Rate, which operates under the board, should be composed solely of independent directors. Lee said, "Any independent director who does not actively work to reduce the NAV discount has no qualification for reappointment," and added, "Independent directors elected by shareholders must take the lead in enhancing corporate value and shareholder value." He continued, "When it comes to acquiring treasury shares, the company should first cancel preferred shares, which are trading at a 51% discount to common shares."

He also demanded that Palliser's proposal be included as an agenda item at next month's shareholders' meeting. Lee said, "As the largest shareholder, LG must refrain from exercising its voting rights on agenda items where it has a conflict of interest at the 25th regular shareholders' meeting, in accordance with the principle of majority-of-minority shareholders," noting, "Independent director Cheon Kyunghoon stated at the Ministry of Justice's 2025 Advanced Legal System Forum last December that, depending on the case, the majority-of-minority principle can help strengthen fairness."

Lee Namwoo, Professor at Yonsei University Graduate School of International Studies and Chairman of the Korea Corporate Governance Forum, is giving an interview at Align Partners in Yeouido, Seoul on the 6th. Photo by Kang Jinhyung

He also criticized the professor-centered composition of the board. The board consists of three inside directors and four independent directors, and LG Chem's independent directors are professors without business experience. Lee proposed, "As in the case of U.S. big tech companies, the number of inside directors should be reduced to one, and the remaining independent directors should be filled mainly with experts in capital markets, governance, and business so that the board can strike a balance between future investment and shareholder returns." On this basis, he added that the board "must sell the 2% stake in Korea Zinc (391,547 shares, with a current value of 651.1 billion won) that it has held since November 2022 and block any infringement of shareholder rights through the use of treasury shares."

He further argued that the chair of the board should be elected from among the independent directors. Through this, the chair of the board, rather than the CEO, would preside over the shareholders' meeting, and independent directors would be required to attend the meeting and listen to shareholders' opinions. Lee criticized the current practice, saying, "All of this is global standard, yet Shin Hakcheol, who recently stepped down as vice chairman and CEO, concurrently serves as chairman of the board."

He also called for the introduction of stock-based compensation. As with Samsung and SK, he argued that most of the total compensation for executives, key managers, and independent directors should be paid in the form of restricted stock units (RSUs). Lee said, "Recent disclosure materials show that none of the three inside directors or the four independent directors hold any company shares," adding, "This is the time for Chairman Koo Kwangmo to make a decisive move."

He also said that non-core assets should be sold to reduce debt. Lee suggested, "According to estimates by domestic securities firms, debt increased by more than 10 trillion won last year, and total debt has reached 25 trillion won, exceeding the market capitalization of 24 trillion won, so it is necessary to pursue selection and concentration through restructuring, including drawing up a deleveraging plan."