Proxy war between Hyosung, NPS re-erupts

People enter Hyosung Group's headquarters in Seoul in this undated file photo. Newsis

The National Pension Service (NPS) decided again this year to vote against the reappointment of Hyosung Group Chairman Cho Hyun-joon and his younger brother, Vice Chairman Cho Hyun-sang, as inside directors of the business group’s affiliates, the state pension fund said Friday.

It was the pension fund’s first decision on how to vote during this year’s proxy season, amid intensifying conflicts between major Korean companies and their shareholders, including activist funds and minority shareholders, over their shareholder return policies. The NPS is expected to express several additional negative opinions on proposals made by the management of other Korean firms.

The pension fund mentioned the Hyosung chairman’s record of damaging the corporate value and the vice chairman’s negligence in company affairs as the reasons for its decision to oppose their reappointment as inside directors of Hyosung Corp., the group’s holding firm.

It gave the same reasons for opposing the reappointment of the older Cho as Hyosung TNC’s inside director and the younger Cho as Hyosung Advanced Materials’ inside director.

Hyosung TNC is one of the key affiliates under the holding firm, which will be led by the chairman after the group’s planned spin-off in July. Hyosung Advanced Materials will be put under a new holding firm, which will be controlled by the vice chairman.

The conglomerate declined to comment on the pension fund’s recent announcement.

Minority shareholders of Hyosung’s affiliates supported the NPS, as they have complained of the prices of the affiliates and the holding firm’s decision to cut its dividends to 3,000 won ($2.30) per share in 2023 from 4,500 won in 2022 and 6,500 won in 2021.

“Hyosung has paid billions of won to the management, while distributing small dividends to shareholders,” one of the minority shareholders said.

Daishin Securities analyst Yang Ji-hwan also pointed out that the planned spin-off may lower Hyosung Corp.’s stock price.

With the expectation of improved shareholder return policies following the conflict with the NPS, the stock prices of Hyosung TNC and Hyosung Advanced Materials soared 5.15 percent and 4.9 percent, respectively, during Friday’s trading session. Hyosung Corp.’s stock price also rose by 1.2 percent.

However, industry officials expect the NPS to lose to Hyosung’s management once again.

“Due to its small stake, the NPS has repeatedly failed in its attempts to expel Hyosung’s owner family from the board,” an industry official said.

The pension fund holds around 6 percent stake in Hyosung Corp., while the group’s owner family has over 56 percent. The holding company and the owner family also own overwhelmingly larger shares in Hyosung TNC and Hyosung Advanced Materials than the NPS.