The Korea Corporate Governance Forum noted that Chung Yong-jin, chairman of Shinsegae Group, should assume a position as an inside director for responsible management following the recent acquisition of a 10% equity stake in Emart from his mother, Lee Myung-hee.
The forum said in a commentary on the 15th, "If the acquisition of shares from Chairwoman Lee is completed, Chairman Chung's equity stake in Emart will increase to 29%," and added, "While Shinsegae claimed this move is a measure to strengthen responsible management, we must consider that the company's net debt stands at over 12.1 trillion won, which is seven times its market capitalization of 1.8 trillion won, indicating an abnormal situation."
Emart previously announced on the 10th that Chairman Chung plans to purchase all of the 10% equity stake held by his mother, Lee. After the acquisition, Chung's stake in Emart will increase from the current 18.56% to 28.56%.
The forum emphasized, "In the past five years, Emart's stock price has plummeted by 46%, resulting in significant financial losses for shareholders," and noted, "Issues have piled up due to Chairman Chung's lax management, numerous failures in M&A transactions reliant on borrowing, and a lack of strategy in e-commerce competition with Coupang and others."
It continued, "The serious issues with the balance sheet cannot be resolved through personnel restructuring, CEO replacement, or expense reduction," adding, "For Chairman Chung to achieve responsible management, debt clearance and improvements in governance are urgent priorities."
The forum also mentioned that Chairman Chung exploited the fact that he is not a registered director, avoiding responsibility while receiving a significant salary, and called for him to seek shareholder approval to assume the role of registered director at this year's shareholder meeting in March. It urged a reconsideration of whether the compensation for Chairman Chung and Chairwoman Lee is appropriate, taking into account shareholder losses and management performance, and urged the sale of unrelated subsidiary assets to reduce liabilities.
The forum argued, "The four outside directors of the Emart board are also composed of former officials from power agencies such as the National Tax Service and the Board of Audit and Inspection, which suits an authoritarian era," stressing the need to appoint independent directors with insights into consumers, retail, and information technology, who work for shareholders.
Additionally, the forum added that the board should establish a system to enhance shareholder rights by announcing a value-up plan and applying stock compensations such as restricted stock units (RSUs) to employees.