The Hyundai Motor Group backtracked from its plan to reform its corporate governance due to foreign corporate raiders' attacks. The group was forced to reconsider the plan from scratch as major proxy advisory firms recommended shareholders to vote against it, siding with US activist hedge fund Elliott Management. As opposition to the plan grew, the stock price of Hyundai Mobis dropped.
On May 21, the group announced that it would revise and improve its governance restructuring plan. Hyundai Mobis and Hyundai Glovis scrapped their contract in which Hyundai Mobis would spin off its module and after-sales parts divisions and merge them with Hyundai Glovis.
"We keenly felt that we had failed to communicate with shareholders and the market while pushing forward with the restructuring plan," said Chung Eui-sun, vice chairman of the Hyundai Motor Group.
He pledged to complement the restructuring plan by collecting opinions from shareholders, stressing the group’s continued efforts to boost its competitiveness, improve corporate governance and enhance its corporate value.
The group’s restructuring scheme focused on putting Hyundai Mobis on the top rung of the group’s corporate governance ladder and solidifying the group owner family’s control of it. The plan was also designed to abolish all cross-shareholding ties among the group’s affiliates.
The group said the plan, if implemented, would boost the shareholder value of Hyundai Mobis, Hyundai Glovis, Hyundai Motor and Kia Motors in the long term.
The plan also required the group’s chairman Chung Mong-koo and his son, vice chairman Chung Eui-sun, to pay more than one trillion won in taxes.
However, the plan went awry as Elliott intervened, demanding that the group adopt a holding company structure. Proxy advisory firms supported Elliott’s claim that the merger ratio between Hyundai Mobis and Hyundai Glovis was disadvantageous to shareholders.
The final blow to the plan came from the National Pension Service, the second largest shareholder of Hyundai Mobis with a 9.82% stake, as it was less likely to support the group.