KT&G’s c.e.o nominee is facing opposition from some major shareholders. Photo credit: KT&G
KT&G’s largest shareholder expressed its opposition to the company’s c.e.o. nominee, citing concerns over declining profitability and questionable business practices that occurred while the nominee served as a board member.
An official at state-run Industrial Bank of Korea (IBK), which owns approximately 8% of KT&G, says IBK opposed the nomination of Bang Kyung-man because “KT&G's operating profit has fallen more than 20%" since he was appointed as vice president, and that "given a decision to secure friendly shares using its own stocks, the independence and fairness of the current board of directors are bound to be seriously questioned.”
Global leading proxy advisor Institutional Shareholder Services Inc. (ISS) has also recommended that shareholders vote against KT&G’s nominee, saying that while the company seems to have a fair and transparent c.e.o. selection procedure, it is unrealistic and ISS has no choice but to question it. ISS also pointed to Bang’s influence on the company’s business performance deterioration as a concern.
If Korea’s National Pension Service (NPS), which is KT&G’s second-largest shareholder with 6.31% ownership, along with foreign stakeholders holding a combined 44.31% stake, accept ISS’ recommendation, Bang would fail to be elected as the new c.e.o.
The appointment of a new chief executive, representing the company's first leadership change in nine years, and the selection of an outside director are the primary agenda items for KT&G's upcoming annual shareholder meeting on March 28.
Unlike previous shareholder meetings where board members were appointed, KT&G has agreed to a proposal from Singapore-based activist fund Flashlight Capital Partners (FCP) to implement a new voting scheme where two directors are elected from nominees through cumulative voting. Earlier this month, FCP endorsed a director candidate suggested by IBK and withdrew its own candidate.
ISS has also urged shareholders to vote for IBK and FCP-backed board nominee, former judge and law professor Sohn Dong-hwan, as a new board member.