Harim owner under harsh spotlight again

By Park Hyong-ki

Local chaebol, or family-run conglomerates, have their hands in practically every business in sectors related to their core and expanded operations.

It is common to see their owners with multiple titles and seats running the show.

Even though some may have professionally trained chief executives running the companies’ daily operations, they are sometimes referred to as a front or “a face” for external publicity.

This is because the owners, or the chairmen and women, have the final say on all matters concerning their self-interest and interest of the companies, behind the scenes.

To maintain this ironclad control, they need to be at the top with majority stakes, while meeting corporate governance regulations, and at the same time without being swayed by external influences of other shareholders not related to the owners’ family.

Harim, a listed livestock feed manufacturing group, and its affiliates illustrate this point.

Harim Chairman and owner Kim Hong-kuk holds the most board seats at his companies among the top 30 chaebol, according CEO Score, a management analyst.

He sits on boards at exactly 12 companies owned by Jeil Holdings, Korea Investment or other affiliates Kim has stakes in.

Granted, they are all his companies. He holds the majority either directly or through Jeil Holdings.

Kim has about a 30 percent stake in Jeil, which has a 48 percent stake in Harim. Jeil has a 26.4 percent stake in Korea Investment, which is registered as an animal medicine company. Harim and its affiliates are into making feeds for pigs, cows and chickens.

He is seemingly untouchable and indifferent to what other nonfamily shareholders think he and his companies should do.

The National Pension Service (NPS), the country’s pension manager, had repeatedly voted against Kim holding multiple board seats at the group’s companies.

This is because it could raise conflicts of interest as to what path the companies should take versus what they should do for their owner.

Last year, the NPS said no to Kim at shareholder meetings of Harim and its affiliates including Farmsco and Sunjin.

The chairman seemingly did not budge then, even though the NPS was one of the company’s key shareholders with more than a 5 percent stake.

And it is highly unlikely he will budge this time because it seems the NPS is no longer key shareholder, according to financial statements.

The pension manager has divested its shares in those companies to under a 5 percent stake. Under the disclosure rule, anyone or any company with more than a 5 percent stake must file an equity ownership report.

The NPS has been investing on behalf of pension beneficiaries as financial investors that usually do not intervene in corporate management affairs. All it ever wanted was high returns from its investment with public money to serve the growing elderly population.

However, social calls have been raised for the NPS to push chaebol and itself to do the right thing.

This came especially after a political scandal involving former President Park Geun-hye, her close associate Choi Soon-sil, Samsung and the welfare ministry.

More than half of 89 owners sit on boards at more than two of their companies, according to CEO Score.

Along with Kim, it named the usual suspects as: Lotte Chairman Shin Dong-bin, Samyang International Chairman Hur Kwang-soo, who is part of the GS owner family, and Korean Air Chairman Cho Yang-ho.

Two of them, Cho and Shin, are under investigation for embezzlement.