KT&G President Baek Bok-in.(Photo: KT&G)

KT&G President Baek Bok-in has been reelected for a 3rd term despite opposition from the company’s second largest shareholder, Industrial Bank of Korea (IBK). President Baek suffered a setback with opposition from IBK, but his reelection was approved by a majority of shareholders, including foreigners, who took the view that his reelection was conducive to the development of the company.

A vote at a shareholder meeting at the KT&G headquarters in Daejeon on March 16 attracted the public’s attention. IBK, which owns a 6.93 percent share in KT&G, put up opposition to his reelection, citing an opaque election process. The largest shareholder, the National Pension Service (NPS) with a 9.09 percent stake, indicated a similar position. 

A candidates screening committee of KT&G nominated KT&G President Baek for a as the sole contender. But IBK reacted against the committee’s nomination of President Baek. The bank, citing the opaque election process, contended that qualifications for becoming candidates were limited to inside figures, including former and current executive vice presidents and KT&G’s subsidiary CEOs, and the application process to make the recommendation ended up being just four days. The bank said President Baek, accused of accounting fraud, might have had a management risk. IBK proposed that two additional outside directors Prof. Oh Chul-ho of Soongsil University and lawyer Hwang Duk-hee be appointed to ramp up a restraining influence. 

Amid the situation, foreign investors with a majority 53.18 percent stake had mixed reactions. Institutional Shareholder Service (ISS), a global leader in corporate governance and responsible investment, recommended a ‘yes vote’ for President Baek’s reelection, but ISS’s archrival Glass Lewis advised against it. 

Things changed as the NPS declared neutral on the previous day of the shareholders’ meeting. More than 76 percent of the voters present on the shareholders’ meeting or 71,142,223 shares approved the company’s proposal. The approval rate stood at 53.3 percent in terms of voting shares. IBK’s proposal of increasing outside directors was not accepted. Most shareholders shared the view that President Baek achieved higher business performances like overseas market exploration and the development of heat not burn e-Cigarette products since he took office, a KT&G official said. 

Speculation circulated that the government, which owns the largest share in IBK, might try to appoint a hand-picked figure. Words also spread that the government’s hidden hands might influence President’s reelection. 

KT&G was privatized in 2002, but the government might attempt to still influence the company, which is closely related to the government’s policies on tax revenues. KT&G is one of a few former public entities, which are headed by figures who have climbed up the corporate ladder to become a CEO. But IBK rejected the controversy, citing its move as the execution of shareholders’ vested rights to enhance shareholders’ values. 

President Baek’s term will last until 2021. He held diverse important stints for a 26-year career. President Baek said, “(KT&G) will establish itself as a global company by adopting strategies to aggressively explore overseas markets, max out shareholders’ values and contribute to the development of the national economy by establishing balanced business portfolios of red ginseng, pharmaceuticals, cosmetics, real estate and other businesses.”