KT&G is pursuing an amendment to its articles of incorporation that excludes the concentrated voting system when appointing the chief executive officer. In response, the global proxy advisory firm ISS recommended against the proposed amendment. The activist fund Flashlight Capital Partners (FCP), in conflict with KT&G, called it "an obvious trick."
According to the distribution industry on the 13th, KT&G will present an agenda item to clarify the method of appointing the chief executive officer at the regular shareholders' meeting scheduled for the 26th at the KT&G Human Resources Development Center in Daejeon. This will involve establishing a clause in the articles of incorporation that stipulates, "In the case of appointing directors through the method of concentrated voting, the chief executive officer and other directors will be separated into different groups."
If the articles of incorporation are amended as proposed, the concentrated voting system cannot be applied when appointing the chief executive officer. The concentrated voting system grants shareholders as many voting rights as the number of directors being appointed, allowing them to vote intensively for preferred candidates. This system is intended to increase the likelihood of appointing candidates supported by minority shareholders, thereby serving as a protective measure for minority shareholders, effectively nullifying one form of minority shareholder protection.
The proxy advisory firm ISS advised institutional investors to oppose the agenda item in its analysis report on KT&G's regular shareholders' meeting. In the report, ISS stated that "the selective application of concentrated voting does not align with ISS policy."
Lee Sang-hyun, the representative of FCP, noted, "CEO Bang Kyung-man won election with a 50.9% approval rating through concentrated voting at the 2024 shareholders' meeting. Excluding the 13% internal equity from the company's own share donation foundation, he has only 38% support," emphasizing, "Claiming special treatment for oneself is a preparation for imperial reappointment."
FCP further urged major KT&G shareholders, the National Pension Service and the Industrial Bank of Korea, to vote against the agenda item. The National Pension Service and Industrial Bank of Korea hold about 7% equity in KT&G. In response, KT&G explained that this is to enhance the stability of the corporate governance system. This means there are concerns about a management vacuum that could arise if the appointment of the chief executive officer fails due to concentrated voting.