Another Brewing Fight for the Controlling Shareholding of Hanjin Kal?

• On 14 March, NPS announced that it has decided to vote against the re-appointment of the CEO Cho Won-tae as the executive director of Korean Air Lines.

• It was also announced on 14 March that GS Retail purchased a 1% stake in Hanjin Kal. In addition, Korean Air Lines also purchased a 1.2% stake in GS Retail.

• One of the growing probabilities of the changing shareholding structures is that KDB may be interested in selling its 10.6% stake in Hanjin Kal.

NPS Votes Against Re-Appointment of CEO Cho Won-tae at Korean Air

Hanjin KAL Corp (180640 KS)'s shares increased by 15.5% to reach 70,900 won on 14 March.

The National Pension Service (NPS) announced that it has decided to vote against the re-appointment of the CEO Cho Won-tae as the executive director at the AGM of Korean Air Lines (003490 KS) on 21 March.

• NPS is the second largest shareholder in Korean Air with a 7.6% stake at the end of 2023.

• The NPS committee cited “negligence in its duty to monitor violations of shareholder rights” as the reason for its opposition, including the excessive remuneration of the executive director.

  • Chairman Cho Won-tae received 8.1 billion won (US$6 million) in total compensation from Korean Air and Hanjin Kal in 2023.

  • This included 3.9 billion won from Korean Air (up 64% YoY) and 4.2 billion won (up 52% YoY) from Hanjin Kal.

  • Although Chairman Cho Won-tae's compensation increased significantly, Korean Air's operating profit and net profit declined by 37% and 35% YoY, respectively in 2023.

• In the past, NPS voted in favor of Chairman Cho Won-tae. The fact that NPS is voting against Chairman Cho this time raises the possibility of a potential shareholder fight between Chairman Cho/related parties and another party that could provide much improved corporate governance.