For Taekwang Shareholders, Showdown Over an Auditor

An extraordinary shareholders' meeting of Taekwang Industrial Co. scheduled for Saturday is expected to bring a confrontation between large shareholders and minority shareholders over the appointment of an auditor.

According to Hannuri, a law firm specializing in investor lawsuits, a Hong Kong-based investment fund, KDMW, notified the Financial Supervisory Service on June 27 that it would recommend that Taekwang's shareholders entrust voting rights with KDMW for proxy voting. The investment fund initiated a campaign to persuade the shareholders through letters and e-mails on June 30. KDMW plans to appoint Kim Jin-wook, a lawyer and a member of People's Solidarity for Participatory Democracy, to watch for internal transactions between affiliates and illegalities related to the payment of low dividends compared with the amount of internal reserves.

Taekwang's management threatened last month to delist the company to prevent interference in management by minority shareholders.

Though Lee Ho-jin, chief executive of the company, and his family hold a 57 percent stake in Taekwang and KDMW holds only 3 percent, the law limits the amount of holdings to 3 percent in votes to appoint an auditor. Thus, both sides will actually have similar voting power during the shareholder meeting.

by Rah Hyun-cheol