Activist fund makes open proposal for Hanjin's corporate governance

By Lim Chang-won Posted : January 21, 2019, 13:01 Updated : January 21, 2019, 13:01

[Aju News DB]


SEOUL -- An activist fund made an open proposal urging the parent group of Korean Air, South Korea's top airline and flag carrier, to reform its corporate governance and jettison unprofitable non-core assets through sincere consultations with outside experts.

The proposal was made Monday by Korea Corporate Governance Improvement (KCGI), the country's first activist private equity fund, which has acquired shares to become a key shareholder of Hanjin KAL, the holding company of the family-run conglomerate controlled by Cho Yang-ho, and Hanjin Corp., a logistics unit.

KCGI demanded that the group adopt a five-year program to improve its image and regain social credibility. Among other things, the fund called for the creation of a special six-member committee composed of independent outside directors and experts to supervise important business issues affecting the value of shareholders.

The private equity fund also proposed the creation of two other independent committees for the rational evaluation and recommendation of executives.

KCGI's proposal came after the management committee of the National Pension Fund hinted at exercising its voting rights as South Korea's largest institutional investor which holds a 7.34 percent stake in Hanjin KAL and 11.56 percent in Korean Air.

Health and Welfare Minister Park Neung-hoo, who heads the pension fund's committee, has called for the cautious exercise of a new system called "Stewardship Code," which was introduced last year to make institutional investors active and engaging in corporate governance in the best interests of shareholders.

For many years, the pension fund with 630 trillion won ($562 billion) in assets has been criticized for being too cozy with large corporations or having blindly voted in line with management. 

Hanjin was hit hard by a scandal involving the chairman's youngest daughter, Cho Hyun-min, who allegedly threw a glass cup and sprayed plum juice during a business meeting with advertising agency officials. The scandal fueled public anger, leading to multiple investigations into the chairman, his wife and children on charges of creating a slush fund, evading taxes, bringing in luxury foreign goods illegally, abusing and assaulting company employees and others. No one has been arrested.
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