Hanjin Group chairman Cho Yang-ho has lost his control of Korean Air, the group's flagship company.
Korean Air held a general shareholders' meeting on March 27, putting Cho's reappointment as an inside director and other matters to a vote.
Cho's reappointment was voted down, with 64.1 percent of the shareholders voting for him and 35.9 percent voting against him. He needed support from at least two thirds of the shareholders to retain his seat on the board of Korean Air.
He was dealt a blow by the National Pension Service (NPS), which has decided to oppose his reappointment. The NPS, the second largest shareholder of Korean Air, has joined foreign institutional investors in ousting Cho from the board.
The NPS’ Special Committee on Fiduciary Responsibility decided to oppose an extension of Cho’s term as an inside director on March 26. The fiduciary committee did not reach an agreement in its first meeting on March 25 because the members were sharply divided.
"We decided against the reappointment of Cho as an inside director because he had a history of undermining corporate value and infringing upon shareholder rights," the committee said. Cho is now on trial for allegedly embezzling a total of 27 billion won.
Earlier, global voting advisors such as ISS and Korean voting advisors such as Sustinvest, and the Center for Good Corporate Governance advised shareholders to object to Cho's reappointment. Three foreign institutional investors -- the SBA of Florida and the Canada Pension Plan Investment Board (CPPIB) and British Columbia Investment Management Corp. (BCI) -- expressed their objections as well.
Cho controls 33.35 percent of the shares of Korean Air, including the stakes held by people and organizations with special ties with him.