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The Korea Herald
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THE INVESTOR
June 24, 2024

Industrials

KT&G to face fierce battle to appoint new CEO at shareholder meeting

  • PUBLISHED :March 06, 2024 - 16:42
  • UPDATED :March 06, 2024 - 16:42
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(KT&G)

KT&G, South Korea's dominant cigarette maker, is expected to face a fierce battle to appoint its new chief executive at an upcoming shareholder meeting, as an activist fund is seen lining up with the company's largest shareholder, observers said Wednesday.

Appointing a new chief executive, which would mark KT&G's first leadership change in nine years, and an outside director are two main agenda items for the company's annual shareholder meeting set for March 28.

Last month, a committee of KT&G nominated Bang Kyung-man, who has served in various capacities at the company since 1998, as a candidate of chief executive.

Unlike previous shareholder meetings that had appointed board members, KT&G accepted a proposal by the activist fund Singapore-based Flashlight Capital Partners to introduce a new voting scheme at this month's shareholder meeting.

Under the new scheme, shareholders of KT&G will be allowed to cast their votes to elect two directors from nominees through cumulative voting.

That means that the activist fund and the biggest shareholder, state-run Industrial Bank of Korea (IBK), could get their nominee on the board of KT&G, some analysts said.

On Tuesday, Flashlight Capital endorsed a director candidate proposed by IBK, while withdrawing its own director candidate.

In a statement, Lee Sang-hyun, head of Flashlight Capital, said IBK's director candidate, former judge Sohn Dong-hwan "will have a firm stance against KT&G's governance issue and implement best practice."

"We welcome the initiative of IBK as KT&G's largest shareholder and pledge our full support for their candidate," Lee said.

Last week, South Korea's financial authorities unveiled a set of plans to increase values of listed firms to cope with their relatively lower valuations, called "Korea discount."

Flashlight Capital has launched a campaign for KT&G to improve its corporate governance and boost shareholder returns since 2022.

"We share the same view that KT&G's governance is in need of urgent repair," Lee said, citing the South Korean government's initiative to boost the values of listed firms.

"It doesn't matter whose candidate gets elected, as long as a truly independent director secures a seat in the boardroom," Lee said.

The shareholder meeting comes as KT&G's profitability declined last year. In 2023, KT&G saw its net profit fall 7.8 percent to 926 billion won ($693 million).

Full-year operating profit also declined 7.9 percent to 1.17 trillion won, while sales were up 0.4 percent to 5.87 trillion won. (Yonhap)

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