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[수친구]

The shameful fall of Korean Air chairman

Scandal-ridden Korean Air chief ousted from board of directors, decision to become yardstick for conglomerates

After years of being mired in controversies and scandals fit for a soap opera involving himself and his closest family members, Cho Yang-ho, chairman of South Korea’s largest air carrier, lost his board seat Wednesday after shareholders voted against extending his term as a director.

Although he retains his management rights with shares held by his family, Cho becomes the first conglomerate chief ousted since the nation’s pension fund decided to actively exercise voting rights last year for responsible investing.

On Wednesday morning, Korean Air shareholders voted against the airline’s proposal to extend Cho’s term as a board director for three years, with 64.1 percent in favor and 35.9 percent against during the regular shareholders meeting. Cho needed 66.66 percent in favor to retain control.

The dismissal of Cho had been expected, as the National Pension Service, which is the second-largest shareholder of Korean Air with a stake of 12.45 percent, decided against extending his term Tuesday on grounds he has a record “of undermining corporate value and infringing upon shareholder rights.” 

Cho Yang-ho, Hanjin Group chairman (Yonhap)

The ownership family of Hanjin Group, which holds Korean Air, is embroiled in allegations of embezzlement, tax evasion, smuggling, assaults and illegal hiring.

Cho has been accused of evading inheritance taxes and embezzling company funds. His wife has been accused of multiple assaults on employees, some of which were caught on camera, and illegally hiring foreign housekeepers.

His two daughters also underwent investigations by law enforcement last year on similar assault charges. His first daughter Hyun-ah sparked outrage in the “nut rage” incident in 2014 by throwing a fit at cabin crew on her flight. The second daughter was embroiled in a “water rage” incident, for purportedly abusing an employee of a contracted ad agency.

The Cho family has become the main symbol of “gabjil,” where those with higher business status abuse their influence over those of inferior status.

The scandals have also raised concerns among investors for potentially hampering the airline and further, the group, with high risks associated with the ownership family.

The NPS decision was also considered to be in line with global and local advisers and foreign pension services.

Earlier, global and local advisers -- Korea Corporate Governance Service, Institutional Shareholder Services and Sustinvest -- all recommended the NPS vote against Cho’s re-election.

Foreign public pension services, including the State Board of Administration of Florida, Canada Pension Plan Investment Board and British Columbia Investment Management Corporation, shared the same view.

For the nation’s pension fund, the third-largest in the world with 640 trillion won ($571 billion) in assets, Korean Air was the first company put to the test since the adoption of the stewardship code last year that acts as a guideline for institutional investors to actively participate in corporate governance.

The NPS adopted the code under growing pressure to apply stricter yardsticks on their investments, with growing risks from owners resulting in revenue and stock price drops.

Korean Air said, “Extending Cho’s term was voted down today. This is the loss of a director position and this does not mean the loss of his management rights.”

Cho’s family still retains a 33.3 percent stake of Korean Air and first son Cho Won-tae currently serves as a CEO of Korean Air. The ownership family also has a 29 percent stake in Hanjin Kal, the holding company of Korean Air.

Park Ju-gun, head of corporate analysis firm CEO Score, said Cho’s dismissal as director sends “a significant signal” to Korean conglomerates with the message that owners can also be ousted for wrongdoings.

There are currently 297 companies, including Samsung Electronics, Hyundai Motor, SK hynix, Naver and Posco, in which NPS holds more than 5 percent of shares.

On Tuesday, the NPS also voted against the term extension of SK Group Chairman Chey Tae-won, citing damage to shareholder rights and corporate value. Chey, on the other hand, was approved to extend his term during the firm’s shareholders meeting Wednesday.

By Shin Ji-hye (shinjh@heraldcorp.com)

[수친구]

yardstick 영어
발음미국/영국 [jaˈrdstiˌk]
뜻① 척도 ② 기준 ③ 야드 자 더보기
숙어
the yardstick of success 성공의 척도.

[수친구]

mire 영어
발음미국/영국 [maiər]
뜻① 진창 ② …을 진흙으로 더럽히다 ③ 수렁 더보기
숙어
get mired in financial quicksand 재정적으로 궁지에 처하다.

[수친구]

embroil 영어
발음미국/영국 [imbrɔ́il]
뜻① 혼란시키다 ② …을 끌어들이다 ③ 휩쓸어 넣다 더보기
숙어
embroil oneself[＝get[become] embroiled] in …에 휘말리다.

[수친구]

pension 영어
발음미국/영국 [pénʃən]
뜻① 연금 ② 연기금 ③ 퇴직금 ④ 자산 더보기
숙어
OLD AGE PENSION

a retirement pension 퇴직 연금

[수친구]

evasion 영어
발음미국/영국 [ivéiʒən]
뜻① 회피 ② 둘러대기 ③ 탈출 더보기
숙어
an evasion of the truth 진실의 회피.

[수친구]

smuggling 영어
발음미국/영국 [smΛgliŋ]
뜻 밀수

[수친구]

assault 영어
발음미국/영국 [əsɔ́ːlt]
뜻① 맹렬히 공격하다 ② 폭행을 가하다 ③ 괴롭히다 ④ 맹공격 더보기
숙어
take[gain] a city by assault 강습하여 도시를 점령하다

make a violent assault on a fortress[the character of the President] 요새를 맹공격하다[대통령의 인격을 통렬히 비난하다].