Baek Byung-yeul is a journalist at The Korea Times focused on cultural content, including films and cultural events in South Korea. You can contact him at baekby@koreatimes.co.kr to share your insights.
Korean Air desperate to gain friendly shares
Korean Air's headquarter office in Gangseo-gu, western Seoul / Korea Times file
By Baek Byung-yeul
By Baek Byung-yeul
Korean Air Chairman Cho Yang-ho
Korean Air is desperate to secure favorable votes ahead of a March 27 shareholders' meeting, even trying to gather proxy ones from its employees, to help keep Chairman Cho Yang-ho on the board of directors.
Hanjin Group has been hit hard over the past few years as Cho and his family members have caused a public uproar over a string of scandals such as the “nut rage” and “water rage” incidents and criminal activities including assaults, bribery, fraud, embezzlement and smuggling.
To ensure transparent management and enhance shareholders' value, local civic groups and the home-grown activist private equity fund Korea Corporate Governance Improvement (KCGI) have joined hands to oust Cho and his family.
According to company rules, board members must get support from two thirds of voters at shareholders' meetings to keep their seats. Analysts said the March 27 meeting will be a proxy fight between Hanjin Group, and the KCGI and civic groups.
Korean Air said Wednesday it had recently asked its employees to entrust their voting rights to the firm “through the appropriate legal procedures.”
“We solicited employees to exercise their voting rights by proxy in accordance with Article 152 of the Capital Market and Financial Investment Business Act,” a company spokesman said.
Korean Air said employees can decide whether to entrust their voting rights on their own and its main goal in gathering proxy votes was aimed at reappointing Cho as a board director.
“We presume it will be a tough fight, so we are trying to gather proxy votes to get a one up for Cho,” the official said.
However, employees said they were being forced to vote with the firm for fear of possible disadvantages.
“I was called by an executive who asked me to entrust my voting right to the company. To avoid disadvantages, I had no choice but to sign a power of attorney document,” a Korean Air employee posted on the anonymous chatting app Blind.
“I've heard that this was directly ordered by a high-level executive. But the firm officially said it asked its employees in a courteous manner,” the employee added.
Though the activist fund doesn't have a stake in Korean Air, KCGI has been wielding its influence over the carrier through the holding firm Hanjin KAL, which has a 29.96 percent stake in the company.
The fund, led by CEO Kang Sung-boo, is the second-largest shareholder of Hanjin KAL as its subsidiary Grace Holdings has a 12.01 percent stake, with Cho and his family holding a combined 28.95 percent. KCGI also owns a 10.17 percent stake in Hanjin.
In addition to ousting Cho from the board of directors at Korean Air, the activist fund has demanded the group create a committee composed of outside directors and experts to supervise anything suspicious in the group such as if Cho and his family members have extra shares under borrowed names.
To counter Korean Air's moves, local civic groups including the People's Solidarity for Participatory Democracy (PSPD) and Lawyers for a Democratic Society (LDS) announced Wednesday they will ask individual stockholders of Korean Air to entrust their votes to them.
“Cho has damaged the corporate value of Korean Air. To oust Chairman Cho from his board of directors post, we will use proxy votes at the shareholders' meeting on March 27 that have been entrusted to us by shareholders who are against Cho,” the PSPD said in a statement.