Nam Hyun-woo has worked as a staff writer at The Korea Times since 2013, mostly covering business and politics. He currently belongs to the Business Desk where he covers topics such as emerging tech, AI, ICT and Korea's chaebol community. Prior to joining the team, he was the paper's correspondent for the presidential office of Korea during the Yoon Suk Yeol and Moon Jae-in administrations.
Institutional Shareholder Services supports Hyundai Motor's dividend policies
Hyundai Motor Group logo is on display at the group's headquarters in Yangjae-dong, Seoul. Yonhap
By Nam Hyun-woo
By Nam Hyun-woo
Institutional Shareholder Services has decided to support Hyundai Motor's dividend policies, favoring the automaker in its scheduled showdown with U.S. hedge fund Elliott, industry analysts said Tuesday.
In addition to Glass Lewis, two of world's leading proxy advisers have sided with the automaker, providing a greater chance for the company to win its desired outcome in a shareholder meeting on March 22.
According to the analysts, the advisory firm has recommended Hyundai Motor shareholders to vote for Hyundai Motor board's plan of paying out 3,000 won per common share as dividend. It urged shareholders to vote against Elliott's proposal of 21,967 won per common share.
The automaker will face difficulties in meeting capital requirements for investments toward research and development if it pays out the amount demanded by Elliott, the firm said.
Elliott's demand will force Hyundai Motor and its affiliate Hyundai Mobis to return 7 trillion won ($6.2 billion) to shareholders through special dividends. Elliott has also demanded Hyundai Mobis to pay 26,399 won per common share.
The Institutional Shareholder Services report followed another prominent proxy adviser Glass Lewis, which recommended shareholders to oppose Elliott's demand last week. In its report, Glass Lewis said Elliott's demand will undermine the company's long-term competitiveness and sustainability.
“Given the number of issues both advisers supported, it seems that Hyundai Motor is ahead of Elliott in the race for votes,” an official at a domestic private equity fund said. “Since both advisers approved Hyundai Motor's dividend policy, the shareholder meeting will likely be focusing on the sustainability of the company.”
In naming three independent directors of the carmaker's board, however, the firm partially favored Elliott's demand, urging shareholders to vote for two of three nominees the hedge fund recommended and for one by Hyundai Motor.
The advisory firm said Yoon Chi-won, recommended by Hyundai Motor, has expertise and insight in the field of finance. For John Liu and Randall MacEwen, recommended by Elliott, the adviser said their experience in the info-tech and energy fields "would help the company."
However, the sources said MacEwen's current job of leading Ballard Power, a fuel cell products maker, could stir controversies over conflicts with his own company's interest.
“Institutional Shareholder Services apparently emphasized diversity in its report and supported some of candidates recommended by Elliott, but it is doubtful whether a company should put diversity ahead of concerns over conflicts in interests,” a source at a domestic investment bank said.
Regarding the report, Hyundai Motor said it welcomes the adviser's support on its dividend proposal, adding it is running a pool of 80 candidates who can serve as its board member to continue efforts for transparency of the board.