KCGS backs Hanjin Kal’s CEO

A local proxy advisory firm sided with Hanjin Kal’s proposal to reappoint the company’s CEO, Suk Tae-soo, as a board member in a shareholder vote this week, dealing a blow to a local activist fund’s opposition to the move.

Korea Corporate Governance Service (KCGS) recommended Hanjin Kal shareholders vote to reinstate Suk as director, disagreeing with activist fund Korea Corporate Governance Improvement’s (KCGI) assessment that he is unfit for the role, according to a statement released by Hanjin Group.

Hanjin Kal is the holding company of Hanjin Group, owning significant stakes in affiliates such as Korean Air.

“[We] cannot find any special problems with candidate Suk Tae-soo that would damage the company’s value or infringe shareholder rights,” said KCGS ahead of Hanjin Kal’s shareholder meeting on Mar. 29.

KCGI, the second largest shareholder of Hanjin Kal with a 12.8-percent stake, has argued against Suk’s reappointment, citing Korean Air’s credit rating drop following its decision to provide support to Hanjin Shipping during its bankruptcy crisis in 2016.

The proxy advisory firm shot down the assertion, saying that Hanjin Shipping’s problems were based on an industry-wide recession. It added that while Suk served as CEO of Hanjin Shipping during the company’s bankruptcy crisis, he was not an executive at Korean Air at the time and that it is difficult to place responsibility on Suk for the decision to provide support for the failing shipping affiliate.

KCGS serves as a proxy advisory firm to the National Pension Service, which owns 6.7 percent of Hanjin Kal.

KCGI was also blocked last week from its proposals to Hanjin Kal for outside director nominations and selling off unprofitable assets after a Seoul High Court ruling. The court said that KCGI cannot make shareholder proposals as it did not meet the required amount of time for being a minority shareholder.

According to the Commercial Act, minority shareholders need to hold at least a 0.5-percent stake in a listed company for six months in order to exercise their rights.

KCGI first acquired Hanjin Kal shares in November and made its first shareholder proposal in January. The fund should have had the stake six months before making the proposal.

BY CHAE YUN-HWAN [chae.yunhwan@joongang.co.kr]