Former Namyang Dairy Products(003920) Chairman Hong Won-sik demanded a retirement payout worth 44.3 billion won from the company but lost in the first trial. The court ruled that former Chairman Hong does not have a retirement pay claim and instead ordered him to return a little over 1.1 billion won from the salary and bonuses he received before stepping down.
The Civil Division 41 of the Seoul Central District Court (presiding judge Lee Kyu-hoon, Director General) on the 27th ruled against the plaintiff in a lawsuit filed by former Chairman Hong seeking executive retirement pay from Namyang Dairy Products.
The court partially accepted Namyang Dairy Products' claim for the return of unjust enrichment against former Chairman Hong. The panel ordered former Chairman Hong to return 1,172,000,000 won of the salary and bonuses he received from January 2023 to April 2024 to the company.
◇Court: "No annual salary on which to calculate retirement pay… no claim arises"
Former Chairman Hong left Namyang Dairy Products' board in Mar. 2024 and in May of the same year filed a lawsuit seeking 44,357,000,000 won in retirement pay. He argued that under the company's executive retirement pay rules, he was entitled to that amount.
The court disagreed. The panel found that the executive retirement pay rules established in 2009 by Namyang Dairy Products apply to former Chairman Hong's retirement pay and that, under those rules, the retirement pay must be calculated based on the annual salary at the time of retirement.
The issue was the annual salary standard that could be applied at the time of retirement. Namyang Dairy Products set the cap on directors' remuneration at 5 billion won for both 2023 and 2024 at the general meeting of shareholders, but those resolutions were later canceled by the court.
Because of this, the panel determined that there was no valid remuneration to serve as the basis for calculating former Chairman Hong's retirement pay. Accordingly, it regarded the annual salary at the time of retirement as 0 won.
The panel said, "Because there is no annual salary that serves as the basis for calculation, former Chairman Hong's claim for payment of retirement pay does not arise," adding, "The remaining arguments premised on this are also without merit."
◇Return of salary and bonuses received before stepping down… 1,172,000,000 won
Conversely, some of the remuneration Namyang Dairy Products paid to former Chairman Hong is to be recovered. The panel ruled that former Chairman Hong must return 1,172,000,000 won of the salary and bonuses paid from January 2023 to April 2024 as unjust enrichment.
However, about 120,000,000 won in health insurance premiums deducted when Namyang Dairy Products paid the remuneration was excluded from the amount to be returned, because former Chairman Hong did not actually receive that sum.
Separately from this case, former Chairman Hong is also on criminal trial on charges of embezzlement and breach of trust. He was indicted on allegations including private use of company funds and receiving money and valuables from a transaction partner and in Jan. was sentenced in the first trial to three years in prison and a forfeiture of 4.3 billion won. The appeal trial is underway.