ISS rebuffs Elliott demand for dividends

The Institutional Shareholder Services (ISS) has joined Daishin Economic Research Institute and Glass Lewis to push back against Elliott Management’s demand for a massive dividend for Hyundai Mobis and Hyundai Motor shareholders.

ISS said in a report it disagreed with Elliott’s demand for a one-time payout of 4.5 trillion won ($3.98 billion), or 21,967 won per share. The proxy advisory firm instead agreed with Hyundai Motor’s proposal for a dividend of 3,000 won per share.

The ISS report follows a report from proxy advisory firm Glass Lewis, also calling for the automaker’s shareholders to back Hyundai Motor. The letter argued that the automaker will need a substantial amount of cash for research and development and potential mergers and acquisitions in order to improve competitiveness and long-term profitability.

Daishin Economic Research Institute also agreed with Glass Lewis, arguing “the company needs proactive investment rather than a mass dividend to acquire long-term stability.”

Experts believe the ISS report has given Hyundai Motor a competitive advantage in its fight against Elliott at an upcoming shareholders meeting on March 22. Shareholders will vote on setting dividends and select outside directors during the meeting.

But ISS did approve most of the outside director nominations from Elliott. It agreed with Elliott’s argument that the boards of Hyundai Motor and Hyundai Mobis lack independence and diversity.

The proxy advisory firm recommended shareholders vote for two Elliott nominees, John Liu and Randall MacEwen, as outside directors for Hyundai Motor. ISS did not endorse Elliott nominee Margaret Bilson as her experience lies more with the aerospace industry than the auto industry.

At Hyundai Mobis, ISS recommended shareholders vote for Elliott nominees Robert Allen Kruse and Rudolph von Meister as outside directors. ISS also agreed with Mobis’s own nomination of Karl-Thomas Neumann and Brian Jones.

The firm approved the automaker’s recommendation for Yoon Chi-won, former president of UBS Group Asia Pacific. ISS commented that Yoon has keen financial understanding and specialized knowledge to help drive Hyundai’s future agenda.

Hyundai Motor objected to ISS’ recommendation of Elliott nominees in a press release, citing potential conflicts of interest.

“MacEwen and Kruse, the Elliott nominees that ISS recommended, currently work for the competitors [of Hyundai Motor and Hyundai Mobis],” Hyundai Motor said in a report. MacEwen currently serves as the president of hydrogen fuel cell developer Ballard Power Systems, whose business conflicts with Hyundai Motor’s push for hydrogen fuel cell electric vehicles.

Appointing Kruse as an outside director for Hyundai Mobis could also bring unwanted business conflict, Hyundai Motor said. The Elliott nominee serves as the chief technology officer for Karma Automotive, with which Hyundai Mobis plans to do more business this year.

Hyundai questioned whether the other two Elliott nominees approved by ISS have relevant background experience to serve as outside directors.

The automaker added that appointing Elliott nominees will damage the company’s management ability.

“If Elliott nominees do become our outside directors, they will surely demand a massive dividend and request excessive management data, which will deter Hyundai from safely managing its business initiatives,” the spokesperson added.

BY KO JUN-TAE [ko.juntae@joongang.co.kr]