Korean Air’s family-controlled management is facing a challenge, as a key shareholder has demanded more outside managers.
Private equity firm Korea Corporate Governance Improvement which acquired a significant stake in Hanjin Group, the airline’s parent company, has become its second-largest shareholders after the founding Cho family. After acquiring shares, KCGI has pushed for top management shuffle and evaluation.
Some of the major reforms in corporate management outlined in its proposal sent on Feb. 6 include appointment of non-executive directors, pay reduction for audits and directors, among others.
In particular, the proposals opposed serving of consecutive terms by Suk Tae-soo, president and director at Korean Air’s de facto holding company Hanjin KAL, who KCGI said was primarily responsible for failing to keep the controlling shareholder family in check.
Hanjin Chairman Cho Yang-ho and his family who serve as executives have been embroiled in scandals for years. Cho Hyun-ah, the eldest daughter and vice president of Korean Air, was sentenced to a one-year jail term for obstructing aviation safety laws in February 2015, in the aftermath of the so-called “nut rage” scandal.
Last year, Chairman Cho was indicted on allegations of corporate fund embezzlement and his daughter Cho Hyun-min, former Korean Air senior executive, was investigated for verbal abuse of an employee at an advertising agency.
KCGI, founded last year, is run by former LK Investment Partners head Kang Sung-bu. The firm explained in a statement its recent involvement is a move “to steer clear of the owning family’s reputation for illegal and abusive practices.”
By Kim Arin (firstname.lastname@example.org)