The only publicly highlighted management company of the National Pension Service, KCC Glass, will confirm the executive compensation cap that the National Pension Service publicly pointed out at this year's shareholders' meeting. KCC Glass has faced criticism from voting advisory groups for paying over 80% of the total aggregates for five registered directors to Chairman Chung Mong-ik. Ultimately, despite being selected as a publicly highlighted management company by the National Pension Service last year, Chairman Chung's compensation is expected to remain at previous levels.
According to the Financial Supervisory Service corporate disclosure system DART on the 10th, KCC Glass, a listed company on the securities market, will hold its regular shareholders' meeting on the 28th at its headquarters in Jamwon-dong, Seoul. The agenda for the shareholders' meeting includes the appointment of outside directors who will serve on the audit committee, approval of director compensation aggregates, approval of financial statements, and the transfer of surplus reserves to retained earnings. KCC Glass has set the total aggregates for director compensation or the maximum cap at 6 billion won, the same scale as the previous year.
Earlier, the National Pension Service's Fund Management Headquarters designated KCC Glass as a publicly highlighted management company in April last year. This was the first time in two years since March 2022 when Namsun Aluminum was selected. At that time, the National Pension Service raised concerns about the appropriateness of KCC Glass's executive compensation cap. The National Pension Service stated, "The reasons for selecting it as a privately managed company were not resolved despite having a non-public dialogue in 2023." As of the end of 2024, the National Pension Service holds 6.87% equity in KCC Glass.
If the National Pension Service determines there are issues with the dividend policy, executive compensation cap, corporate value, or shareholder rights of an invested corporation, it initially engages in a dialogue with that corporation for up to one year on a non-public basis. If improvements are not made, it transitions to a privately highlighted management company and continues the dialogue for another year. If issues remain unresolved, it converts to a publicly highlighted management company and subsequently increases the pressure through shareholder activities such as shareholder proposals.
In other words, KCC Glass being a publicly highlighted management company means that the National Pension Service has been attempting to engage in dialogue for several years. KCC Glass is criticized annually as it allocates 80% of the total aggregates paid to five registered directors to Chairman Chung Mong-ik. The National Pension Service voted against the director compensation cap approval at KCC Glass's regular shareholders' meeting in 2024, following its stance in 2023.
When KCC Glass proposed the director compensation cap of 6 billion won last year, the voting advisory firm Good Corporate Governance Research Institute recommended against it, citing "excessive compensation payments to controlling shareholders and the absence of an independent compensation review body." At that time, the Good Corporate Governance Research Institute also noted that the salary gap between Chairman Chung Mong-ik and the second-level professional manager was irrational as it exceeded six times.
The number of directors at KCC Glass, including Chairman Chung Mong-ik, totals five (with three outside directors). Chairman Chung is the second son of the late Chung Ju-yung, the founder of Hyundai Group, and the younger brother of the late Chung Sang-young, honorary chairman of KCC. According to KCC Glass's quarterly report, Chairman Chung received 2.527 billion won as compensation in the first to third quarters of last year, similar to the amount for the same period in 2023. Although the annual compensation from last year's business report has not yet been disclosed, it is estimated to be around 3.4 billion won, similar to previous years.
According to the recently disclosed notice of KCC Glass's shareholders' meeting, the total aggregates paid to the five directors last year amounted to 4.18667 billion won. The total compensation given to the three outside directors was 192 million won, while about 400 million won was paid to Chairman Chung and CEO Byeon Jong-o. KCC Glass recorded an operating profit of 57.9743 billion won last year, a 39.0% decrease from the previous year.
Some speculate that despite criticisms from institutions and advisory firms, KCC Glass allocating substantial compensation to Chairman Chung may be to prepare for partitioning costs while considering the separation of KCC and its affiliates. Since 2022, Chairman Chung has been divesting his shares in KCC and increasing his equity in KCC Glass. Chairman Chung Mong-jin of KCC has also sought to increase his equity in KCC this year. The market interprets that the two chairmen are hastening their share adjustment efforts for corporate separation.
A KCC Glass official stated, "In July last year, we established a compensation committee led by three outside directors to oversee the performance evaluations and compensation policies for inside directors," adding, "We are also actively engaging in dialogue with the National Pension Service." An official from the National Pension Service's Fund Management Headquarters noted, "The dialogue process with publicly highlighted management companies cannot be disclosed," and stated, "We will announce it in accordance with regulations if there are changes in the status of publicly highlighted management companies."