FTC chief slams Elliott Advisors

The chief of Korea’s antitrust agency said it was “unfair” for U.S. activist hedge fund Elliott Management to demand that Hyundai Motor Group covert into a holding company.

Speaking at a forum in Seoul on Thursday, Kim Sang-jo, the chairman of the Fair Trade Commission, said that if Hyundai Motor and its auto parts affiliate Hyundai Mobis merged and took on a holding company structure, as the American fund suggested on Monday, it would violate Korea’s law on the separation of financial and industrial capital.

Should Elliot’s demands become reality, the holding company would inevitably have the automaker’s financial arms — Hyundai Card and Hyundai Capital — under it, which would break the law that prohibits a non-financial holdings company from having a subsidiary that is a finance or insurance company.

Elliott Advisors, the Hong Kong unit of the U.S.-based activist hedge fund, holds 1.5 percent stakes in three key business units — Hyundai Motor, Kia Motors and Hyundai Mobis — that are worth a total of $1 billion. After Korea’s second-biggest conglomerate unveiled measures in late March that will simplify its complicated cross-shareholding structure, the fund released a set of proposals titled “Accelerate Hyundai” aimed at enhancing shareholder value.

Kim went on to name two elements that would constitute a “healthy corporate governance structure” during his speech.

The first was giving flexible discretionary power to minority opinion holders and the other was protecting the rights of the majority of stakeholders.

“Corporate management is about continued challenges with unknown results under uncertainties,” he said. “If minority decision makers make either careless decisions, grave mistakes or violate the law on purpose, many other parties with interests — from minority shareholders to creditors, laborers, consumers and partner companies — will have their rights hurt.”

He stressed the need to establish a system that will protect the majority of stakeholders.

“Finding ways to harmonize these two incompatible goals is the process of forging a healthy corporate governance structure,” he said. “Each country, company and era should contemplate creating a governance structure that is ready for reality.”

BY SEO JI-EUN [seo.jieun@joongang.co.kr]