April 26, 2024

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[THE INVESTOR] Hyundai Motor Group Chairman Chung Mong-koo awaits re-election as the in-house director of shareholders, and the National Pension Service, the group’s second-biggest single stakeholder, holds the key.

The NPS, currently embroiled in the scandal that has led to the arrest of Samsung Electronics Vice ChairmanLee Jae-yong, holds 8.02 percent of Hyundai Motor Group’s shares, following the group’s holding company Hyundai Mobis with 20.78 percent. Chung alone is the third-biggest shareholder, with 5.17 percent of shares, according to the Financial Supervisory Service.

The NPS’ management committee meeting is slated to open on March 10 to discuss pending matters including Hyundai’s upcoming general meeting of shareholders scheduled for March 17.

The shareholders are to vote on the re-election of Chung along with the approval of the group’s financial statements, the appointment of an outside director and other agenda items.

“If the NPS votes against Chung’s re-election, it will put a blemish on Chung’s credibility. It would mean Chung has failed to gain the trust of the group’s second-biggest shareholder,” said a lawyer who spoke on the condition of anonymity.

Other shareholders may cast doubt over whether Chung is suitable for the position, he added.

According to Sohn Chang-wan, a professor at Yonsei University Law School, “A ‘no’ vote by the NPS may ultimately shed stronger light on the need for the group to reform its corporate governance structure.”

Sohn added, however, where the NPS is headed and whether it has the power to influence other shareholders’ votes remains to be seen.

The fund said a decision on whether to re-elect Chung will be based on what is best for its shareholders in the long term.

According to regulations, Chung needs support from the majority of shares owned by stockholders present at the meeting and over 25 percent backing of total stocks issued to be elected.

The NPS had said during a shareholders meeting in 2013, “(Chung) has a history of violating shareholders’ rights and interests and damaging group value,” when it had opposed Chung’s re-election at the time.

In-house directors at Hyundai Motor serve a three-year term, and re-election takes place during the shareholders’ meeting.

Of the fund’s 558.3 trillion won ($489 billion) reserves, the NPS invests a total of 102.6 trillion won in the local stock market, making up 7 percent of the Kospi and Kosdaq markets combined.

The NPS held more than 5 percent of shares in 285 companies as of February, according to the Korea Exchange.

“The public has been demanding the NPS play a more active role as a key shareholder. All eyes are on whether the fund will vote differently from the majority,” said analyst Kwon Soon-woo of SK Securities.

The NPS has voted against 320 motions and showed a 9.6 percent disapproval rate in 3,344 cases it participated in across 586 companies in which it held shares in 2016, according to local market researcher CEO Score. The fund has voted in favor of 2,994 motions, or 89.5 percent. It did not cast a vote for 20 motions, abstained for nine and remained neutral once.

The NPS, then the biggest shareholder of Samsung C&T, supported the merger of the company with Cheil Industries in 2015, coming under vehement criticism for allegedly overlooking shareholders’ interest.

By Kim Bo-gyung/The Korea Herald (lisakim425@heraldcorp.com)