Market welcomes Korean Air CEO Cho Yang-ho’s removal from board seat
Korean Air Chairman Cho Yang-ho’s ouster from the company’s board of directors on March 27 boosted investor confidence, as reflected in the share prices of the airline and its holding company.
Almost 36 percent of shareholders who attended the general meeting on March 27 voted against the reappointment of the CEO, who has been embroiled in a series of charges that include dodging inheritance taxes and embezzling company funds. His family members have also come under fire for mistreatment of company staff.
Market observers and civil activists welcomed the decision, with share prices of the company and its holding firm Hanjin KAL soaring on the news. Hanjin KAL shares surged more than 10 percent on the decision before closing 0.39 percent higher at 25,700 won ($22.60).
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Share prices of the Kospi-listed Korean Air rose jumped almost 5 percent, before shedding much of its early gain by close. Korean Air closed 2.48 percent higher from the previous day while the benchmark Kospi inched down by 0.15 percent to 2,145.72 points.
Analysts here said the market’s uplift sentiment is due to expectations of better corporate governance.
“The decision means that shareholders are accepting concerns that Cho is undermining Korean Air’s corporate value,” said Choi Go-un, an analyst at Korea Investment and Securities.
Ahead of the shareholders meeting, the pension operating committee of the National Pension Service -- the second-largest shareholder of Korean Air -- decided to oppose the appointment of Cho as a board of director on the previous day, joining other proxy advisers ISS, Sustinvest and Center for Good Corporate Governance. They said Cho has a history of hurting company value.
“Investors see the decision as a positive sign that by removing the owner family from the board, the company could improve shareholders’ value and decrease global discount factors,” Cho added.
Shinhan Investment analyst Park Kwang-rae also agreed.
“While Cho’s failure to renew his term as an inside director is a positive signal for revamping the corporate structure,” Park said, adding that the upcoming shareholders meeting of Hanjin KAL, the de facto holding company of Hanjin Group, is also important.
The general shareholders meeting of Hanjin KAL, slated to take place on March 29, will decide on the reappointment of Hanjin KAL CEO Suk Tae-soo, a close aide to Cho.
The meeting is also scheduled to vote on strengthening requirements for its board members, in which case Cho, currently facing an embezzlement trial, might lose his seat at the holding firm. Cho’s term at Hanjin KAL is until March 2020.
Park Ga-young (email@example.com)