The National Pension Service (NPS) has once again decided 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 announced Friday. This decision marks the NPS’s first stance during this year’s proxy season, amidst escalating conflicts between major Korean companies and their shareholders, including activist funds and minority shareholders, over shareholder return policies. It is anticipated that the NPS will express several more negative opinions on proposals put forth by the management of other Korean firms.
The pension fund cited the Hyosung chairman’s track record of damaging corporate value and the vice chairman’s negligence in company affairs as the basis for opposing their reappointment as inside directors of Hyosung Corp., the group’s holding firm.
Similar reasons were given for opposing the reappointment of the elder Cho as inside director of Hyosung TNC and the younger Cho as inside director of Hyosung Advanced Materials.
Hyosung TNC stands as one of the key affiliates under the holding firm, which will be under the chairman’s leadership following the group’s planned spin-off in July. Hyosung Advanced Materials will fall under a new holding firm, to be overseen by the vice chairman.
Hyosung Group declined to offer a response to the recent announcement by the pension fund.
Minority shareholders of Hyosung’s affiliates have expressed support for the NPS, citing concerns over the valuations of the affiliates and the holding firm’s decision to reduce 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 allocated significant sums to the management, while providing minimal dividends to shareholders,” voiced one minority shareholder.
Analyst Yang Ji-hwan from Daishin Securities highlighted the potential negative impact of the planned spin-off on Hyosung Corp.’s stock price.
Following the anticipation of enhanced shareholder return policies post the conflict with the NPS, the stock prices of Hyosung TNC and Hyosung Advanced Materials surged by 5.15 percent and 4.9 percent, respectively, during Friday’s trading session. Hyosung Corp.’s stock price also experienced a rise of 1.2 percent.
Nevertheless, industry insiders foresee another victory for Hyosung’s management over the NPS.
“Given its limited stake, the NPS has repeatedly faced defeat in its efforts to remove Hyosung’s owner family from the board,” noted an industry official.
The pension fund holds approximately a 6 percent stake in Hyosung Corp., whereas the group’s owner family possesses over 56 percent. The holding company and the owner family command significantly larger stakes in Hyosung TNC and Hyosung Advanced Materials compared to the NPS.