SEOUL (Reuters) – South Korea’s National Pension Service (NPS) said on Tuesday it will vote against extending Cho Yang-ho’s term as a board director at scandal-hit Korean Air Lines Co Ltd.
Cho controls South Korea’s top airline, and is its CEO and chairman. NPS’s opposition to his staying on the board is the latest example of shareholder activism in Asia’s fourth-biggest economy, long dominated by corporate giants accused of benefiting family owners at the expense of minority investors.
Proxy adviser ISS has also recommended investors to vote against the reappointment of Cho, who is on trial over charges of embezzlement and breach of trust. Cho has denied the charges against him.
“We have decided to oppose the election, believing that he has records of undermining corporate value and infringing upon shareholder rights,” NPS said in a statement.
Korean Air said it found the state fund’s decision “very regrettable.”
“The fund should have been more prudent in (making) its decision as its action implicitly affects investors’ take on the issue,” the airline said in a statement, adding that the decision ignored the principle of the benefit of doubt.
If other shareholders support NPS’s decision in a vote on Wednesday, it will end Cho’s 27-year tenure on the board and make him the first controlling shareholder of any South Korean corporate giant to be forced off a board, analysts say.
A two-thirds majority of votes by those present at the annual shareholder meeting is needed if Korean Air’s proposal to re-elect Cho for another three-year board term is to pass. That means NPS, which has an 11.56 percent stake, needs to garner support from other shareholders.
Two South Korean civil groups have urged minority shareholders to vote against Cho’s term extension, but they will be challenged by Cho, who controls nearly 30 percent of the airline through its parent Hanjin Kal Corp.
The airline’s reputation has been hit by other scandals involving Cho family members.
In April 2018, Cho’s youngest daughter Emily Cho faced a storm of public criticism for allegedly throwing a drink at a business meeting attendee. She was later cleared of all charges related to the incident.
Cho’s elder sister, Heather Cho, made headlines over a notorious “nut rage” incident in 2014, when she lost her temper over the way she was served nuts in first class and ordered the Korean Air plane return to its gate at a New York airport.
