'SK's pursuit of social value complements capitalism'

SK Innovation Chairman of Board Kim Jong-hoon / Courtesy of SK Innovation

By Nam Hyun-woo

SK Group's pursuit of social value as a corporate purpose is a model case of complementing the shortcomings of shareholder capitalism, and the SK Innovation board will join Chairman Chey Tae-won's drive to spread the idea, the board chairman of SK Innovation said Tuesday.

“Since capitalism brings with it shortcomings, there may be various opinions on whether a company's profit wholly belongs to the company,” SK Innovation Board Chairman Kim Jong-hoon said during an interview broadcast on the company's intra-office news channel. “And this raised the concept of corporate social responsibility (CSR). SK Group's pursuit of social value as its main corporate purpose is an idea that goes beyond CSR.”

Under Chey's drive, SK Group has been highlighting its affiliates' contributions to society in a management index.

In May last year, the group introduced the index to measure each units' social contributions and made this public in each of their financial statements or sustainability reports. For example, SK Lubricant, a subsidiary of SK Innovation, created social value worth 131.5 billion won in 2018, as it sold a premium lubricant base which improves fuel efficiency by 2 percent ― thus lowering greenhouse gas emissions.

“SK Group is consolidating its logic that a company should focus on creating social value and working on methodologies to measure and quantify this concept. This is a unique and favorable corporate culture which cannot be seen in other companies,” Kim said.

“To convince more people to join the group's pursuit of social value, there needs to be an improved theoretical and logical approach, to better structure the concept. Continuing to hone this idea will provide a significant edge over rivals for SK.”

Kim is an ex-bureaucrat who spent 40 years as a trade specialist. He served as minister for trade from 2007 to 2011 and was the chief negotiator for the Korea-U.S. Free Trade Agreement.

He became an outside director of SK Innovation in March 2017 and was appointed chairman of the board in March last year. This was the first time for an outside director to head SK Innovation's board.

As chairman, Kim said he will focus on enhancing the board's communication with management, in order to improve its decision making process and help the company enhance its capabilities to weather through current headwinds.

“Monitoring and evaluating a company's management is one of the key roles for outside directors,” he said. “To make appropriate decisions, however, it is important for the board to understand the underlying stories behind each issue and the reason why management comes up with such, meaning communication by the board makes the company stronger.”

In terms of the business environment surrounding SK Innovation this year, Kim agreed that the outlook remains gloomy, citing the current spread of the new coronavirus.

“SK Innovation's earnings last year fell short of expectations, and a negative impact across the global economy seems to be inevitable for this year too, due to the abrupt virus outbreak,” he said. “It depends on how fast the disease can be contained ― and it is hard to say whether the virus is being contained ― so this year will not be easy for SK Innovation, also.”

However, Kim said the company is well-positioned to explore new possibilities in a crisis, because handling uncertainties will help the company grow its capabilities.

“A company must experience its ups and downs, but SK Innovation should continue making efforts to create value for its shareholders, and this is the top priority for me and other board members,” Kim said. “As long as the company makes a profit, there should be a dividend.”

SK Innovation saw its share price remaining at a “tepid level” last year as its weakening yet core refining business directly hit its bottom line. The company bought 578.5 billion won of its own shares in an effort to improve share prices and shareholder value.

“We have contemplated a lot on ways to improve shareholder value amid the sluggish share price,” Kim said. “The share buyback decision was in line with our overall efforts to improve shareholder value.”