KT&G is pushing for a change to its articles of incorporation that excludes a cumulative voting system when appointing the representative director and CEO at the upcoming annual general meeting. In response to some shareholders' claims that this is "a blatant trick," KT&G explained that it is a measure to accurately reflect shareholder intent.

KT&G headquarters in Seoul. /Courtesy of KT&G
KT&G headquarters in Seoul. /Courtesy of KT&G

According to the financial investment industry on the 14th, KT&G has submitted a proposal to amend its articles of incorporation for consideration at the annual general meeting on the 26th. One of the contents is "clarification of the method for appointing the representative director and CEO." The core of this is to introduce a provision in the articles of incorporation that stipulates, "In cases where directors are appointed through cumulative voting, the representative director and CEO and other directors are distinguished as separate groups."

Cumulative voting is a system that grants shareholders a number of votes equal to the number of directors being elected, allowing them to concentrate their votes on preferred candidates. It was introduced as a measure to protect minority shareholders. If KT&G amends its articles of incorporation, the appointment of the representative director will proceed with a simple yes/no vote rather than cumulative voting.

KT&G's position is that electing the representative director through cumulative voting may not accurately reflect the entire shareholders' opinions, hence a simple yes/no vote is more appropriate. KT&G stated in a position paper, "Appointing the representative director and CEO through a majority vote of attending shareholders clearly aligns with the intent of our articles of incorporation and is the method that can most accurately reflect shareholders’ opinions."

KT&G also noted that major shareholders have expressed concerns regarding the cumulative voting system. Earlier, activist fund Flashlight Capital Partners criticized it as a "pretext" for the incumbent CEO's imperial reappointment, but KT&G maintains that it merely took shareholders' opinions into account.

KT&G remarked, "Prominent domestic and international institutional investors and major shareholders have communicated various concerns related to last year's shareholders' meeting, where the representative director was appointed through cumulative voting," adding, "We decided to pursue amendments to our articles of incorporation to accurately reflect the overall shareholders' opinions based on the one share, one vote principle."

KT&G also stated, "Most corporations select the representative director from the board of directors, but KT&G appoints the representative director at the shareholders' meeting to ensure shareholder oversight of senior management," and further noted, "We will continue to do our best to enhance shareholder value."