Group Control at Stake
Hanjin Group chairman Cho Won-tae is facing a proxy fight with his elder sister Cho Hyun-ah, a former vice president of Korean Air, over the control of Korea’s 13th largest business group.
The two children of the late former Hanjin Group chairman Cho Yang-ho are planning to appeal to minority shareholders before the general shareholders' meeting slated for next month.
Cho Hyun-ah has teamed up with KCGI and Bando E&C to take away Hanjin Group’s control from her brother. The three allies are reportedly preparing a shareholder proposal to be submitted to the Hanjin KAL general shareholders' meeting. According to the Commercial Act, a shareholder proposal must be finalized six weeks ahead the date of the general shareholders' meeting. Given that Hanjin KAL's 2019 general shareholders meeting was held on March 29, the last Friday of March in 2019, about two weeks remain until the deadline.
The proposal from the allied group is expected to be based on a five-year reform plan announced by KCGI in January 2019. KCGI proposed the establishment of an executive recommendation committee, a corporate governance committee, and a compensation committee. It also called for restructuring of the hotel and resort business to lower the group’s debt ratio. However, as Cho Hyun-ah feels a strong attachment to the group’s hotel business, the proposal is expected to change regarding this matter. Cho Hyun-ah may have demanded a quid pro quo for giving up her management right.
The beleaguered incumbent chairman can maintain his position if he manages to secure enough friendly stakes. He can secure a 33.45 percent stake if he unites with Lee Myung-hee, his mother and an advisor to Jungseok Corp., Cho Hyun-min, his younger sister and a managing director of Hanjin KAL, Delta Air Lines, and Kakao Corp.
After all, he needs to obtain support from minority investors as well as institutional investors such as the National Pension Service to secure group control. A simulation of KB Securities based on the general shareholders meeting in 2019 showed that 81.56 percent of the shareholders would attend the meeting, with 50.4 percent of them against the reappointment of Cho Won-tae as chairman of Hanjin Group.