Shareholders of Korean Air parent keep chairman on board after proxy battle
By Joyce Lee
SEOUL (Reuters) - Shareholders of Korean Air's parent firm Hanjin Kal voted on Friday to keep group chairman Walter Cho as a board director, an outcome seen by analysts as a victory for the status quo at the conglomerate.
Cho, 44, who became chairman after his father's death last year, fended off a challenge from his older sister and an activist fund to replace him with a professional manager.
About 57% of Hanjin Kal shareholders represented at the annual general meeting (AGM) voted for him to continue as a director of the parent firm.
But the roughly 48% of shareholders voting for mobile industry veteran Kim Shin-bae, nominated by Cho's sister Heather and activist fund Korea Corporate Governance Improvement (KCGI), Hanjin Kal's biggest shareholder, to join the board, fell short of a majority.
The proxy fight has been a major distraction for the loss-making airline as it struggles to survive the severe aviation industry downturn triggered by a coronavirus pandemic.
From April, all executives will forgo 30% to 50% of their salaries, the carrier said this week.
"Some shareholders may have made a conservative choice as the airline industry is directly hit by coronavirus," said Park Sang-in, a professor at Seoul National University.
However, the fight is probably not over.
Both Delta Air, a Korean Air joint-venture partner seen as a "white knight" for Walter Cho, as well as opposing shareholders, including KCGI and builder Bando Engineering & Construction, have boosted stakes since the end of 2019.
"While (Walter) Cho stemmed a crisis this time around, questions about Hanjin's governance issues, and his uncertain position of relying on other shareholders like Delta, his mother and younger sister has not changed," Park said.
"He will have to prove his capabilities by normalising Korean Air's management difficulties."
Delta had a stake of 14.9% in Hanjin by this month, up from 10% in September, while KCGI had 18.6%, up from 17.1% late last year. Walter Cho had a stake of 6.5%.
The shareholder alliance opposing Walter Cho, including his older sister Heather Cho and KCGI, has raised its combined stake to about 42% by this month, matching the stake of roughly 42% held by shareholders seen backing Walter Cho.
"We will strive to normalise Hanjin Group even after this shareholders' meeting, until the end," Heather Cho, KCGI and Bando said in a joint statement this week.
Hanjin Kal shares closed up 29.9%, while Korean Air shares rose 3.3%, outperforming a rise of 1.9% in the KOSPI benchmark.
(Reporting by Joyce Lee; Editing by Stephen Coates and Clarence Fernandez)
