KCGI, union question Cho Hyun-min returnKorea Corporate Governance Improvement (KCGI) on Wednesday criticized Cho Hyun-min’s return to management at Hanjin Group and said it will send a letter to the board of the group’s holding company to ask why her return was necessary.
The homegrown activist fund is the second-largest shareholder of Hanjin Kal and has constantly pushed the group to reform its corporate governance since last year.
The statement was released after Cho was reinstated as a senior vice president at Hanjin Kal, the group’s holding unit, and as executive vice president of JungSeok Enterprise, a building management affiliate, as of Monday.
The fund said it is hard to understand why the board would allow a figure that has done tremendous damage to the group, both financially and socially, to return to management so soon, in a statement Wednesday.
According to KCGI, the market value of Hanjin’s five major affiliates including Hanjin Kal, Korean Air and Jin Air plunged by roughly 20 percent over the six months after a scandal involving her throwing juice at employees in a fit of rage made headlines in April last year.
The fund also pointed out that her being listed as an executive at Jin Air, though she was actually a foreign national, nearly cost the budget airline its operating license, causing great damage to the airline’s business.
“Considering the decline in worker morale and tainted brand image of Hanjin Group, it is hard to materialize all the damage [Cho Hyun-min] caused the company,” the fund said in statement. “Though she stepped down from all her positions at Hanjin affiliates after the scandal, she still took billions in wage and severance pay as she left.”
KCGI said that it will send a letter to the board of Hanjin Kal to ask why it needed to bring Cho back when there could be many people within and outside the group that are eligible to take her roles. According to Hanjin Group on Monday, Cho will focus on boosting the group’s social responsibility activities and nurturing new growth engines.
The fund said it will also inquire as to whether the board has any plans on how it will compensate for the losses in share price of Hanjin affiliates caused by Cho and how her wages and severance pay were calculated.
“With problems caused by Cho still not fully figured, it is against the responsible management schemes the group pledged for to make her return just two months after the death of former Hanjin Group Chairman Cho Yang-ho,” the fund added.
The fund suspects her return could be a way of securing money to pay for the massive inheritance tax the Cho family needs to come up with following the death of Cho Yang-ho.
Hanjin Group responded to KCGI on Wednesday.
“It is a far-fetched interpretation to say the [scandal involving Cho Hyun-min] led to share price plunges - share prices were affected by outside factors including market situations and oil prices,” the group said. “Hiring back Cho had nothing to do with the board of Hanjin Kal as she is not a listed executive.”
The group also stressed that Cho is a marketing expert who can largely contribute to increasing the market value of the group.
“Cho has been in charge of advertising and marketing for over 10 years at Hanjin affiliates including Korean Air and Jin Air,” the group said. “Based on her abundant marketing experience, she can contribute to overall revenue increases and improve shareholder benefits.”
On Tuesday, Jin Air’s labor union also released a statement opposing Cho Hyun-min’s return.
“After Cho was found to have been illegally listed as a Jin Air executive, we managed to keep our license, but the Transport Ministry has been imposing tough business sanctions on the company for the last year,” the labor union said in statement.
Under the sanctions, the airline is restricted from winning new routes or adding new planes to its fleet. Just last month when the government distributed extra traffic rights to fly between Korea and China, Jin Air was ruled out from competition due to the sanctions.
The union said it is hard to understand why the group would bring Cho back when the sole cause of the sanctions was her.
BY KIM JEE-HEE [firstname.lastname@example.org]