The Korea Corporate Governance Service (KCGS), which provides advice regarding voting rights for the National Pension Service (NPS), took Hyundai Motor Group’s side, saying that Elliott Management Corp.’s outside director appointment-related proposal and excessive demand for dividends could hamper the future growth of the group. Earlier, the KCGS objected to the group’s corporate governance reform plan in May 2018. Now with the KCGS standing by the group’s side, the NPS is unlikely to exercise its veto against the group.
The KCGS recently released a report and said that it is in favor of every outside director appointment-related proposal of Hyundai Motor Co. and Hyundai Mobis, is against Elliott’s proposal regarding the same issue, and is in favor of Hyundai with regard to cash dividend payment. The KCGS advised non-exercise concerning Elliott’s dividend payment-related proposal.
The report is likely to affect the decision-making process of the NPS. At present, the NPS is a major shareholder in Hyundai Motor with a shareholding of 8.27 percent and in Hyundai Mobis with a shareholding of 9.45 percent. Affiliated parties own 29.11 percent of Hyundai Motor, including 21.43 percent owned by Hyundai Mobis and 5.17 percent owned by Hyundai Motor Group chairman Chung Mong-koo, and affiliated parties’ current shareholding is 31.17 percent in Hyundai Mobis. In short, the parties can exercise a significant influence against Elliott Management at a shareholder meeting. If the NPS stands on the side of Hyundai, the shareholding of friendly shareholders rises to almost 40 percent.
In addition, American financial services company Capital Group, which is friendly to Hyundai, can add to the influence. Of course, it remains to be seen whether the NPS will actually agree with Hyundai although the KCGS is doing so. This is because Institutional Shareholder Services (ISS), another advisor to the NPS, has different opinions. The NPS is planning to hold a meeting on March 14 to determine how to exercise its voting rights in Hyundai Motor Group.