Nexon continues to raise questions about NCsoft

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Nexon continues to raise questions about NCsoft

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Shareholders and employees of NCsoft, the nation’s second-largest game company, gather at the NCsoft R&D Center in Bundang District, Seongnam, Gyeonggi, on Friday morning, to attend the company’s shareholders’ meeting. [NEWSIS]

The estranged relationship between the two biggest game companies in Korea, which started at the beginning of the year, was still evident during a shareholders’ meeting on Friday.

Representatives of Nexon, the largest shareholder of NCsoft, were present at the NCsoft meeting - the first time the two businesses had met after a conflict over management in January.

While there is not all-out warfare between the two companies, officials from Nexon have raised questions about Kim Taek-jin, NCsoft’s CEO, promoting his brother and wife to the company’s top executive posts and about the latter company paying a premium price for shares after an equity swap with Netmarble Games.

Kim’s term as CEO was extended for another three years at the shareholders’ meeting, which was attended by Nexon’s executive director, Kim Jung-wook, and Chief Financial Officer Han Kyung-taek.

The majority stakeholder didn’t oppose the reappointment of Kim Taek-jin but asked him to stay transparent and give relevant explanations when making future management decisions.

“We still wonder if the equity swap with Netmarble Games has actually helped boost NCsoft’s stock and corporate values,” said Kim from Nexon. “So I would like to request that the company provide a legitimate explanation and relevant evidence for future investment cases and to have all shareholders regularly updated about collaborative projects.”

Nexon became the majority stakeholder of NCsoft in 2012 after purchasing the 14.68 percent stake formerly owned by the game company’s CEO and founder Kim Taek-jin.

As Nexon founder Kim Jung-ju is a close friend of Kim Taek-jin, the two companies have had a friendly relationship, despite being competitors.

In fact, when it purchased a stake in NCsoft, Nexon publicly said it had no intention of meddling in the company’s management and that the purpose of the stake purchase was solely to invest and expand cooperation between the two firms.

But things turned sour when Kim Taek-jin’s wife, Yoon Song-yee, was promoted to president of NCSoft earlier this year without Nexon being notified.

Additionally, NCsoft sold 1.95 million units of treasury stocks worth 391.1 billion won ($354.5 million) to Netmarble Games in mid-February, accounting for 8.93 percent of NCsoft’s total shares.

The sale was in exchange for NCsoft buying in 29,214 units of Netmarble shares worth 380.3 billion won.

In addition to the initial amount of shares owned by NCsoft - 9.98 percent of total - the equity swap in February resulted in NCsoft owning shares of 18.91 percent in Netmarble, which is larger than Nexon’s 15.08 percent.

Back then, NCsoft explained that the equity swap decision was in line with its decision to strengthen its partnership with Netmarble, the nation’s largest mobile game developer, in a bid to diversify its services in the mobile game sector.

But it was interpreted in the market as a move to protect its management against Nexon by forming an alliance ahead of the shareholders’ meeting.

In fact, NCsoft paid almost double the unit stock price compared to what Chinese game giant Tencent shelled out when it bought Netmarble’s shares the previous year.

Regarding questions brought up at the shareholders’ meeting about whether NCsoft overvalued Netmarble’s stocks, Kim Taek-jin said, “I think the unit price of Netmarble’s shares were at an appropriate level, because the company is expected to grow steadily.”

Kim also dealt with the family management issue, explaining that although he does not usually think such a system is ideal as executives who are family members of company heads tend not to take full legal responsibility in most cases, his brother and wife work hard and are willing to shoulder the burden.

He added that promoting his wife was legitimate, as Yoon proved her management capability by making NCsoft America profitable after it had suffered from a deficit. Kim also gave a similar reason for appointing his brother Kim Taek-heon to executive director.

While the game companies continued to struggle in resolving their differences, financial companies, which were also among the 800 companies that held their annual shareholders’ meeting on Friday, had no trouble passing various issues, including the extension of a chairman’s second term and the nomination of new outside directors.

Hana Financial Group’s Chairman Kim Jung-tai succeeded in winning the shareholders’ vote on extending his position for another three years.

As a result, Kim will continue to head the financial group until 2018. This is a huge change considering that chairmen of the financial group have only been allowed to extend their position for a year previously after serving the first three years.

Kim has proposed changing the second term from one year to three. He succeeded his mentor and former chairman of the financial group Kim Seung-yu in 2012.

Kim was the only candidate who ran for the top position. As his chairmanship has been extended, it is likely that he will put more weight behind driving his agenda of merging Korea Exchange Bank with Hana Bank earlier than the promised date of 2017.

Kim’s initiative since the second half of last year to bring the date of the merger of the two banks forward hit a major roadblock earlier this year when the Seoul court accepted KEB’s proposal and ordered the financial group to hold back the merger process until the end of the first half of this year.

KB Financial Group was another major banking group that the market had its eye on Friday.

At the lenders’ shareholders meeting, seven new outside directors were named.

All nine of KB Financial Group’s outside directors exited to take responsibility for their involvement in the so-called “KB incident” where the top management of the financial group was locked in a controversial feud over replacing the bank’s main computer system.

The incident ended up forcing both the chairman of the financial holding company and the president of its flagship KB Kookmin Bank to resign while the outside directors were also held accountable.

KB on Friday at the shareholders’ meeting proposed seven new candidates as its outside directors.

They are Choi Young-hwi, former president of Shinhan Bank; Choi Un-yeol, Sogang University professor; Park Jae-ha, deputy dean at the Asian Development Bank Institute; Eunice Kim, Ewha Womans University Law School professor; Han Jong-soo, Ewha Womans University Business School professor; Lee Byung-nam, LG Academy president; Yoo Suk-ryul, former Samsung Card president.

One of the biggest changes at this year’s shareholders meeting is that the shareholders have had a bigger say on the selection of the banking group’s outsider directors nominations, unlike in the past when the chairman made the selection.

BY PARK SU-RYON, KIM JI-YOON AND LEE HO-JEONG [lee.hojeong@joongang.co.kr]

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