"Will 50 Years of 'Respect for Humanity' Be Shaken?... Hanmi Pharmaceutical in Turmoil over Controlling Shareholder's Alleged Shielding of Sexual Misconduct"

Controlling shareholder shields executive in in-house sexual harassment case
Hanmi Pharmaceutical executives also demand an apology
Signs of escalation into a management control dispute

About one year after Hanmi Pharmaceutical Group shifted to a professional management system, the group has been thrown into internal turmoil over allegations that Shin Dongguk, Chairman of Hanyang Precision and the group’s largest shareholder, shielded an in-house sexual harasser. This comes as members of Hanmi Pharmaceutical, driven by a sense of crisis that the corporate philosophy of "respect for humanity" and "value creation" established half a century ago by the late founding Chairman Lim Sungki could be undermined, have taken the unusually strong step of open collective action. In the midst of this, Chairman Shin has moved to expand his control by additionally acquiring shares of Hanmi Science, the holding company of Hanmi Pharmaceutical Group.

Shin Dongguk, Chairman of Hanyang Precision

According to the pharmaceutical industry on the 24th, confusion within Hanmi Pharmaceutical is growing over controversy that Chairman Shin intervened in handling a sexual harassment case involving an executive at the Paltan plant and quashed disciplinary action. The incident began with allegations of sexual harassment by senior executive A at the Paltan plant in Hwaseong, Gyeonggi Province, a key production base for Hanmi Pharmaceutical. Park Jaehyun, CEO of Hanmi Pharmaceutical, attempted to impose strict personnel measures on the executive to protect the victim, but it is reported that strong pressure was exerted by Chairman Shin during this process.

According to the transcript made public by CEO Park, Chairman Shin is said to have made remarks defending the executive who had been reported as the perpetrator of sexual harassment during a conversation with Park. Park’s side claims that, in the course of this, Shin expressed opposition to pursuing disciplinary action and pressured management, thereby undermining the legitimate exercise of its personnel authority. The executive identified as the perpetrator left the company in the form of a voluntary resignation without formal disciplinary measures and is said to have subsequently moved to a competitor. This is why criticism is emerging both inside and outside the company that a serious sexual misconduct case was effectively wrapped up as a "punishment-free resignation." There is also internal and external criticism that this runs counter to the intent of the Commercial Act amendments the government is pursuing to rein in the arbitrary management of controlling shareholders, as well as the principles of ESG (environmental, social and governance) management.

There is a view that this controversy could escalate beyond a conflict over personnel administration into an issue of governance and management independence. Within the industry, some interpret CEO Park’s response as an effort to protect Hanmi Pharmaceutical’s corporate culture and identity, which have continued for 53 years since its founding, against the controlling shareholder’s interference in management.

Park Jaehyun, CEO of Hanmi Pharmaceutical. Hanmi Pharmaceutical

As the situation has come to light, Hanmi Pharmaceutical employees are struggling to contain their anger. The previous day, division heads and executives of Hanmi Pharmaceutical held a picket protest in the headquarters lobby and issued a statement calling for Chairman Shin’s apology and an end to his interference in management. In the statement, the executives urged, "Chairman Shin, whose deplorable gender sensitivity has damaged Hanmi Pharmaceutical’s reputation, must apologize to the victim and to all members of the company."

In a message to employees, CEO Park said, "Making the recording (of the conversation with Chairman Shin, the controlling shareholder) public was a decision that was extremely difficult to bear as the CEO, but it was an unavoidable last resort to protect the corporate culture that has been maintained for more than 50 years," adding, "As a pharmaceutical company that deals with life, the values we must uphold should come before the influence of the controlling shareholder."

Some also believe that this incident has exposed Hanmi Pharmaceutical’s governance risk. Under CEO Park’s leadership, Hanmi Pharmaceutical is evaluated to have proven the efficiency of a professional management system by posting record-high results last year and boosting the share price by more than 200%. In this context, there is a widespread perception within the company that if the controlling shareholder’s "power above power" style of interference continues, it will inevitably lead to the outflow of top talent, damage to the brand image, and a resulting decline in competitiveness.

With the terms of four board members, including CEO Park, expiring next month, attention is focusing on what decisions will be made at the shareholders’ meeting scheduled for the same period. It could be a watershed moment that determines whether the effectiveness of the professional management system can be sustained. A source in the industry said, "It appears that employees are more keenly aware than expected of how serious it is for a controlling shareholder to use his position to intervene in the handling of a sexual misconduct case and to manipulate personnel decisions."

On the 13th, Chairman Shin additionally purchased more than 4.41 million shares of Hanmi Science held by the side of Lim Jongyoon, Chairman of Beijing Hanmi Pharmaceutical and eldest son of former Chairman Lim Sungki. As a result, Chairman Shin’s stake (his personal holdings plus those held by Hanyang Precision) has increased to 29.83%.