KCGI opposes Hanjin's transfer of management control

KCGI CEO Kang Sung-boo

By Jhoo Dong-chan

The Korea Corporate Governance Improvement (KCGI) has put the brakes on Hanjin Group's leadership succession where incumbent Chairman Cho Won-tae took over the group's management reins after his father, former Chairman Cho Yang-ho, passed away on April 8.

According to Hanjin KAL, Hanjin Group's holding company, the KCGI has requested the Seoul Central District Court to designate an inspector who will look into the firm on May 29. The KCGI is the holding company's second-largest shareholder.

The private equity fund (PEF) led by CEO Kang Sung-boo has demanded a thorough inspection into whether Hanjin's succession process was made legitimately under related law.

“If the succession was not legitimate or has yet to be completed though board meetings, the firm shouldn't use the chairman title to address Cho Won-tae,” the KCGI said.

Under the 2011 Revised Commerce Act, a shareholder can ask the court to assign an auditor to investigate whether management's moves and decisions are in line with corporate and statutory mandates. A court could propose arbitration based on the auditor's findings.

The PEF also demanded an inspection of whether a severance payment for the late Chairman Cho was made legitimately. If the payment was made properly, the PEF also seeks an investigation on the amount and details of the severance package.

Hanjin Group immediately denied the allegations.

“The group's succession and the severance payment for the late Chairman Cho were both made lawfully,” it said.

The KCGI secured a 9 percent stake in Hanjin KAL to become the holding company's second-largest shareholder in November. It has since continuously expanded its stake in the firm.

In May, the PEF secured a 15.98 percent stake in Hanjin KAL through its subsidiary Grace Holdings. The late Chairman Cho and his affiliates owned a 28.95 percent stake.

His son owns a 2.34 percent stake.