Korean Air chief unlikely to keep board seat

Members of the Korean Public Service and Transport Workers' Union hold banners urging the National Pension Service to oppose Hanjin Group Chairman Cho Yang-ho's reappointment as a Korean Air inside director during a protest in front of an NPS Seoul office in Seoul.

NPS opposes Cho Yang-ho's reappointment

By Nam Hyun-woo

Hanjin Group Chairman Cho Yang-ho

Chances are becoming slimmer for Hanjin Group Chairman Cho Yang-ho to keep his board seat at Korean Air as more and more shareholders are turning against him, according to industry analysts Tuesday.

Cho and his family members have made the headlines over the past few years for allegedly breaking numerous laws and engaging in other dubious activities, including the misuse of company funds and mistreatment of subordinates.

Korean Air, Hanjin Group's flagship unit, will hold its annual shareholders' meeting today at its headquarters in Seoul. Among other issues on the agenda, shareholders will be asked to vote on Cho's reappointment as an inside director, as his current term expired March 17.

Currently, shareholders with a combined 33.35 percent stake are regarded as in favor of Cho. The National Pension Service (NPS) has an 11.56 percent stake in Korean Air while the company's employees own 2.14 percent ― the remainder are held by minority shareholders.

Since Korean Air's articles of association designate that an inside director's reappointment requires the approval of two-thirds of attending shareholders, Cho needs the votes of an additional 34 percent to secure the seat.

The NPS Pension Operating Committee decided Tuesday to oppose Cho's reappointment during the shareholder meeting. The committee said it believes “the candidate has a history of undermining corporate value or shareholder value” and the committee can “oppose such a candidate's appointment as a board member.”

Currently, Cho is on trial for embezzlement and breach of trust worth 27 billion won ($23.8 million) among other charges. These include unfairly collecting commissions from aircraft maintenance firms, and using corporate money to pay the lawyers' fees incurred by Heather Cho, his oldest daughter and former Korean Air vice president, during her trial in the so-called “nut rage” incident.

Citing this, leading civic groups including Lawyers for a Democratic Society, and the People's Solidarity for Participatory Democracy (PSPD) have been urging minority shareholders who cannot attend the meeting to assign proxy votes to their representatives.

“We have been receiving proxies since March 13 and we will reveal how much of a stake we have collected in the morning before the shareholder meeting,” a PSPD official said.

Regarding this, Korean Air said, “The civic groups' moves are affecting a private company's management,” and urged shareholders to “wisely consider that the firm has logged operating profits for 14 consecutive quarters, and Cho has to attend a series of international aviation events later this year.”

The carrier also claimed that two members of the NPS operating committee were not qualified as they hold Korean Air shares individually.

Multiple proxy advisers, including Institutional Shareholder Services, the Korea Corporate Governance Service, and Sustinvest have already expressed their opposition to Cho's reappointment.

On Friday, Hanjin Group's de-facto holding firm Hanjin KAL will hold its annual general meeting. At that meeting, shareholders will also vote on strengthening requirements for its board members, which may deprive Cho of his Hanjin KAL board membership depending on the court ruling in his embezzlement trial.

Also, Cho's close aide, Hanjin KAL CEO Suk Tae-soo's reappointment will be voted on at the meeting.