Hyosung Heavy Industries' plan to reduce the size of its board ahead of the enforcement of the revised Commercial Act was voted down due to opposition from the National Pension Service. With the proposal rejected, analysts said the controlling shareholder's defenses to block board entry by candidates backed by minority shareholders are likely to weaken.
According to the industry on the 19th, Hyosung Heavy Industries held a regular shareholders meeting at the Hyosung Building in Mapo District, Seoul, that day and put to a vote an amendment to its articles of incorporation to reduce the board size from the current 3–16 directors to 3–9, but it was rejected. The amendment also included strengthening director qualification requirements and setting terms flexibly within three years.
If cumulative voting is applied under the revised Commercial Act set to take effect in the second half of this year, the more directors elected at once, the greater the chance that candidates supported by minority shareholders will gain board seats. As a result, ahead of shareholders meetings, corporations moved to shrink board sizes or change terms flexibly, which was interpreted as a preemptive step to defend controlling shareholders' management rights.
The National Pension Service, which opposed the proposal, also pointed out these issues. Before the shareholders meeting, the National Pension Service said it would oppose the change, noting that "while reducing the maximum number of directors through the articles of incorporation weakens general shareholders' ability to submit shareholder proposals and request cumulative voting, the board can be operated at an appropriate size even without amending the articles."
It added, "We oppose it because it limits the appointment of directors with diverse experience and abilities, and we oppose shortening or extending outside directors' terms without justifiable reason." The National Pension Service also opposed the proposal to approve the cap on directors' remuneration, but that item passed at the shareholders meeting.
Hyosung Heavy Industries said of the outcome, "We respect the decision of the shareholders," adding, "We will reexamine the agenda item and swiftly prepare effective alternatives that align with shareholder value enhancement and communicate with the market."
Meanwhile, Woo Tae-hee, head of Hyosung Heavy Industries, said in remarks that day, "We will further strengthen our business competitiveness through AI utilization," adding, "We will create new growth opportunities by developing AI-based new businesses and products."
Woo also presented strengthening companywide AI capabilities, establishing a responsible management culture, and focusing on financial soundness as tasks, saying, "We will adopt as a management policy 'a corporation that pushes relentlessly to deliver results' and further reinforce execution-centered management."