Shareholder Proposal by Chul Whan Park, Largest Individual Shareholder of Kumho Petrochemical, Receives Positive Response from the World's Top Sovereign Wealth Fund
As well as from Corporate Governance Experts and Analysts
NBIM,manager of the world's largest sovereign wealth fund,and CalPERS,the largest public pension in the US,stand in favor of most of the agendas proposed by Park
CGCG recommends in its analysis to vote for Park as inside director,revision of AoI,outside directors,etc.
Expert group publishes a report to conclude "Shareholder Park is trying to 'do the right thing'"
SEOUL,South Korea,March 24,2021 -- The shareholder proposal submitted by Chul Whan Park,a senior executive and largest individual shareholder of Kumho Petrochemical,is receiving support from the world's top sovereign and pension funds as well as Korean and overseas corporate governance expert groups and analysts,with the upcoming annual general meeting (AGM) of shareholders scheduled on March 26th.
Norges Bank Investment Management (NBIM) which runs the world's largest sovereign wealth fund,Government Pension Fund Global (GPFG),and is one of the major shareholders of the company,disclosed its voting decisions for the upcoming AGM on its website on March 23rd (local time in Norway). NBIM is well-known for its socially responsible investment and according to the announcement,voted for almost all the agendas proposed by Park. While voting against all director nominees submitted by the company,NBIM gave support to three of the director nominees from Park's shareholder proposal – Park,himself as inside director,and Min John K and Byung Nam Rhee as outside directors and audit committee members.
California Public Employees' Retirement System (CalPERS),the largest public pension fund in the US,also voted for most of the agendas proposed by Park,including #Dividend payout,#Separating roles of CEO and chairman of the board of directors,#Establishment of Internal Transaction Committee and Compensation Committee with constitution of their roles and authority,#Appointment of Park himself as inside director,#Appointment of Min John K as outside director and audit committee member,etc.
In response to the investors' supports,Park said "NBIM and CalPERS are not only known for their global-scale investment,but also for their high ESG standards",and added,"Their support for my shareholder proposals is a clear indication of their concerns as shareholders about the company's governance issues."
On March 22nd,Center for Good Corporate Governance (CGCG),a think tank devoted to improving corporate governance system in Korea,published an analysis on agendas for Kumho Petrochemical's AGM,with recommendation to vote for the agendas proposed by Park including #Separation of CEO and chairman of the board of directors,and #Appointment of Min John K,Benjamin Joe (Yong Bum Cho),and Jung Hyun Choi as outside directors and audit committee members.
CGCG further noted "Chan Koo Park,CEO and chairman of Kumho Petrochemical,had been sentenced guilty of breach of fiduciary duty and duty of loyalty. As such,chairman Park is currently under employment restriction by the Ministry of Justice,but the board of directors has not taken any corrective action",and "to enhance the company's corporate value,the candidates proposed by shareholder Park is deemed more suitable than the company's candidates,to hold the current management in check and pose an issue about the chairman's illegal employment." Moreover,CGCG's analysis found the agenda in shareholder proposal on separating the roles of CEO and chairman of the board and to appoint the chairman from outside directors,has higher relevance in terms of securing independence of the board.
With regards to dividend payout,CGCG explained "both dividend payout agendas proposed by Park and the company seem to have logical grounds,but according to the company's disclosure,they are incompatible,and shareholders can only choose one of the two agendas",which is why the report stood in favor of the company's dividend payout proposal.
Experts from both inside and outside Korea also made assessments. Analyst Douglas Kim of Smartkarma,a US-based independent research network,ran an analysis report and concluded "Park is trying to 'do the right thing' in improving shareholder value of Kumho Petrochemical by introducing higher standards corporate governance practices as well as enhanced value of existing assets". He also added that this is one of the most rare and interesting cases of shareholder engagement in Korea in the past decade.
In Korea,Yuanta Securities ran a report and said,"The company's stock rises when the situation begins to turn out in favor of Park," and "there is no reason for any minor shareholder to oppose Park's proposals on normalization of shareholder return,retirement of treasury shares,rationalization of directors' fees,and securing independence of the board of directors." Furthermore,the report added,"It will work in favor of the shareholders to take Park's proposal into consideration and avoid company-biased perspective on this issue",with a remark that the global proxy advisor ISS' recommendation is disappointing.
Park said,"I would like to express my deepest gratitude for the wide support from our fellow shareholders and stakeholders with regards to my proposal aimed at transforming Kumho Petrochemical",and "I will carry on my transparent communication activities with all our fellow shareholders and stakeholders to strive for enhancing the company's long-term corporate value."
NBIM's Vote on Kumho Petrochemical Annual General Meeting of Shareholders Agenda
*Highlighted agendas are the ones proposed by shareholder,Chul Whan Park
Agenda
Details
NBIM's Vote
1.1
Approval of the 44th Financial Statements (excluding the Statement of Retained Earnings)
FOR
1.2.1
Dividend of KRW 4,200 per common share and KRW 4,250 per preferred share; provided,differential dividend in case of the largest shareholder,etc. (KRW 4,000 per common share)
AGAINST
1.2.2
Dividend of KRW 11,000 per common share and KRW 11,050 per preferred share (shareholder's proposal)
FOR
2.1.1
Separation of the CEO and the chairman of the board of directors (amend Articles 31 and 32 of the AOI)
AGAINST
2.1.2
Establishment of committees (ESG Committee,Internal Transactions Committee and Compensation Committee) within the board of directors (amend Article 34 of the AOI)
AGAINST
2.2.1
Separation of the CEO and the chairman of the board of directors (amend Articles 31 of the AOI) (shareholder's proposal)
FOR
2.2.2
Establishment of committees (Internal Transactions Committee and Compensation Committee) within the board of directors (amend Article 34 of the AOI) (shareholder's proposal)
FOR
2.2.3
Composition of the Internal Transactions Committee,etc. (newly add Article 35-5 to the AOI) (shareholder's proposal)
FOR
2.2.4
Composition of the Compensation Committee,etc. (newly add Article 35-6 to the AOI; amend Article 29 of the AOI) (shareholder's proposal)
FOR
3.1
Appointment of Yi Seok Hwang as an outside director who also becomes a member of the Audit Committee
AGAINST
3.2
Appointment of Byung Nam Rhee as an outside director who also becomes a member of the Audit Committee (shareholder's proposal)
FOR
4.1
Appointment of Jong Hoon Baek as an inside director
AGAINST
4.2
Appointment of Chul Whan Park as an inside director (shareholder's proposal)
FOR
5.1
Appointment of Do Sung Choi as an outside director
AGAINST
5.2
Appointment of Jung Mi Lee as an outside director
AGAINST
5.3
Appointment of Soon Ae Park as an outside director
AGAINST
5.4
Appointment of Min John K as an outside director (shareholder's proposal)
FOR
5.5
Appointment of Benjamin Joe (Yong Bum Cho) as an outside director (shareholder's proposal)
AGAINST
5.6
Appointment of Jung Hyun Choi as an outside director (shareholder's proposal)
AGAINST
6.1
Appointment of Do Sung Choi as a member of the Audit Committee who is an outside director
AGAINST
6.2
Appointment of Min John K as a member of the Audit Committee who is an outside director (shareholder's proposal)
FOR
7.0
Approval of directors' remuneration ceiling
AGAINST
CGCG's Voting Recommendations on Kumho Petrochemical Annual General Meeting of Shareholders Agenda
*Highlighted agendas are the ones proposed by shareholder,Chul Whan Park
Agenda
Details
CGCG's
Recommendation
1.1
Approval of the 44th Financial Statements (excluding the Statement of Retained Earnings)
N/A
1.2.1
Dividend of KRW 4,000 per common share)
FOR
1.2.2
Dividend of KRW 11,050 per preferred share (shareholder's proposal)
AGAINST
2.1.1
Separation of the CEO and the chairman of the board of directors (amend Articles 31 and 32 of the AOI)
AGAINST
2.1.2
Establishment of committees (ESG Committee,etc. (newly add Article 35-6 to the AOI; amend Article 29 of the AOI) (shareholder's proposal)
FOR
3.1
Appointment of Yi Seok Hwang as an outside director who also becomes a member of the Audit Committee
FOR
3.2
Appointment of Byung Nam Rhee as an outside director who also becomes a member of the Audit Committee (shareholder's proposal)
AGAINST
4.1
Appointment of Jong Hoon Baek as an inside director
AGAINST
4.2
Appointment of Chul Whan Park as an inside director (shareholder's proposal)
FOR
5.1
Appointment of Do Sung Choi as an outside director
AGAINST
5.2
Appointment of Jung Mi Lee as an outside director
FOR
5.3
Appointment of Soon Ae Park as an outside director
FOR
5.4
Appointment of Min John K as an outside director (shareholder's proposal)
FOR
5.5
Appointment of Benjamin Joe (Yong Bum Cho) as an outside director (shareholder's proposal)
FOR
5.6
Appointment of Jung Hyun Choi as an outside director (shareholder's proposal)
FOR
6.1
Appointment of Do Sung Choi as a member of the Audit Committee who is an outside director
AGAINST
6.2
Appointment of Min John K as a member of the Audit Committee who is an outside director (shareholder's proposal)
FOR
7.0
Approval of directors' remuneration ceiling
AGAINST
