Hanjin Group chairman Cho Yang-ho is facing a strong challenge from Korea Corporate Governance Improvement Ltd. (KCGI), a local activist fund which is the second largest shareholder of Hanjin KAL Corp., the holding entity of Hanjin Group, and Hanjin Transportation Co.
KCGI is drumming up support for its challenge, arguing that those who committed a criminal act or damaged a company’s reputation should not be allowed to be appointed as its executive directors to establish obedience to the law in corporate management. Cho and his family members are charged with smuggling, tax evasion and illegal admission into school.
KCGI said on Jan. 21 that it would publicly propose to major shareholders of Hanjin KAL and Hanjin Transportation a five-year plan to restore trust in Hanjin Group. It offered measures in three parts, including corporate governance reform, corporate value improvement and consumer satisfaction improvement and social trust enhancement.
In particular, the KCGI proposed that those who implicate their companies in a crime and tarnish their reputation be banned from sitting on corporate boards to establish a tradition of law obedience in the corporate community. The suggestion seemed to target Cho and his family members who stirred up a public controversy by abusing their power.
Currently, Cho Won-tae, president of Korean Air Lines Co. and the eldest son of the group chairman, is the only one among Cho’s family members who engages in Hanjin Group’s management. Previously, Cho's elder sister Cho Hyun-ah and younger sister Cho Hyun-min left the company after the so-called nut rage incident and water rage incident, respectively.
Accordingly, Cho Won-tae is the leading candidate to take over managerial right from the group chairman but it does not seem to be easy. This is because the Ministry of Education regards his admission into Inha University, which is run by Hanjin Group, in 1998 as illegal. To prevent the cancellation of his college degree he has filed an administrative lawsuit.
The KCGI said, “We ask major shareholders and management of Hanjin KAL and Hanjin Transportation to accept out public proposald with a forward-looking attitude. If there is no change in their attitude, we will exercise our shareholders’ right more actively.”
Meanwhile, the KCGI, which is led by CEO Kang Sung-boo owns a 10.81 percent stake in Hanjin KAL and an 8.03 percent stake in Hanjin Transportation through its special purpose entities.