[NEWS IN FOCUS] Hanjin amps up war with KCGI

The power struggle between Hanjin Group and activist fund Korea Corporate Governance Improvement (KCGI) is growing more intense as a March shareholders’ meeting draws closer.

Hanjin Group on Wednesday attacked the fund, claiming it does not have the right to make shareholder proposals under Korean commercial law. KCGI immediately responded, accusing the company of “neglecting the smallest shareholder rights” in a statement.

Wednesday’s war of words comes after the activist fund last month delivered a proposal detailing ways to improve Hanjin affiliates’ corporate governance and business performance including adding more outside directors and selling poor performing assets.

While Hanjin quickly released a broad five-year plan that included selling off its unprofitable property in Songhyeon-dong, central Seoul - where it once planned but failed to build a hotel - and adding one more outside director to Hanjin Kal’s board, KCGI said the “attempt is a good sign, but not enough.”

It was in response to KCGI’s criticism that the conglomerate claimed that the fund doesn’t have the right to make proposals. Hanjin cited Article 542 of the Commercial Act that includes special provisions on listed companies.

The article states that although making agenda proposals for shareholder meetings is a protected shareholder right, minority shareholders need to hold at least a 0.5 percent stake in a listed company for over six months to exercise their rights.

Though KCGI is currently the second-largest shareholder of the group’s holding company Hanjin Kal with a 10.71 percent stake, and also of Hanjin Transportation with a 8.03 percent stake, the group said all shareholders apart from the largest count as minority shareholders.

KCGI has not held its stake for more than six months.

“For KCGI to exercise its rights, it needed to have held a stake in Hanjin Kal or Hanjin Transportation before July 31 of 2018, six months before it made its shareholder proposal on Jan. 31 this year,” the group said in statement. KCGI first acquired Hanjin shares in November.

KCGI responded that the Hanjin management lacks will to listen to feedback on its past mistakes and is violating shareholder rights.

In a separate case, KCGI announced Wednesday that the Seoul Central District Court approved the fund’s request to read and transcribe the list of shareholders. The fund applied for an injunction to the court on Jan. 18 after Hanjin Kal and Hanjin Transportation ignored the same request.

“While it is a basic shareholder right to read and transcribe the shareholder roster, Hanjin affiliates did not respond to the request for over a month,” KCGI said in statement. “We cannot help but be suspicious of why the companies tried to hide the rosters away.”

The fund said it will closely look into whether there is anything suspicious on the rosters, such as if the owner family has extra shares under borrowed names.

The fight between the two is expected to continue until the shareholders’ meeting, and this isn’t the only front that the group’s leadership can expect to be attacked on. The scandal-ridden Hanjin owner family is facing multiple challenges to their control over the chaebol.

Hanjin Group heiress Cho Hyun-ah, internationally infamous after the nut rage scandal in 2014, is facing accusations from her husband of verbal and physical abuse as well as child abuse. The police started an investigation into that case on Tuesday. Cho and her husband, currently going through a divorce, have twin sons. Cho’s husband claims that she would shout “Die” when she was angry and attempt to strangle him. Cho has claimed that her husband is an alcoholic.

Cho Hyun-ah’s mother Lee Myung-hee, the wife of Hanjin Chairman Cho Yang-ho, is also once again making headlines for verbally abusing her Filipino housekeeper as JTBC unveiled a recording on Tuesday of Lee shouting and swearing at the housekeeper. The recording was reportedly made in 2015. Lee has already been indicted for abusing Hanjin employees.

BY KIM JEE-HEE [kim.jeehee@joongang.co.kr]