March 28, 2019 13:06
Hanjin Group chairman Cho Yang-ho in a humiliating defeat Wednesday lost control of Korean Air, the jewel in his troubled empire's crown, after a series of scandals engulfed his family.
Cho became the first chief of one of Korea's effectively family-owned conglomerates or chaebol to be ousted by shareholders, chiefly because the National Pension Service, which is controlled by the government, is heavily invested in the flag carrier.
Industry watchers were stunned by the development, and some grumbled that the decision was politically motivated and said the NPS should not be meddling in the private sector.
In a shareholders' meeting that day, 64.1 percent backed Cho's reappointment despite all the scandals that surround him. But that fell just short of the two-thirds majority he needed according to the airline's articles of incorporation.
The NPS is Korean Air's second-largest shareholder with 11.7 percent stake and paved the way for more sway in decisions to appoint or dismiss key executives by adopting the Stewardship Code in July last year.
The NPS in a meeting a day earlier decided not to back Cho's reappointment. Some foreign investors, who account for a 20.5-percent stake, and some of the small shareholders who account a 34.5-percent stake also opposed his reappointment.
They argued that Cho's own indictment for embezzlement and tax evasion as well as his disastrous decisions to appoint members of his own dysfunctional family to top positions damaged the airline's image and made his stewardship untenable.
Korean Air management in a statement protested that Cho should be considered innocent until proven guilty, but the family's shenanigans have been barely out of the headlines in recent years.
"Cho remains the largest shareholder of Korean Air's holding company, Hanjin KAL, and has not lost management control," Korean Air management claimed in a statement. It said the carrier will not be run by Cho's son, Won-tae, who recently forfeited his university degree for cheating, or board chairman Woo Kee-hong.
Korea's chaebol families are able to keep an iron grip on their publicly traded companies due to a Byzantine network of holding structures.
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