Chey Tae-won, chairman of SK Corp., the nation's largest oil refiner,
yesterday survived a second attempt to unseat him by Sovereign Asset Management
Ltd., the largest foreign single investor.
In retaining his executive director post another three years, Chey received
support from 60.6 percent of the investors attending the company's annual
shareholders meeting. Fifty-two percent of total shareholders with voting rights
approved the board reappointment.
The meeting last just 90 minutes, a sharp contrast to last year's 10-hour
marathon in which Sovereign failed to win control of the SK board with its
outside director nominees.
"We're especially delighted to see significant support from foreign
shareholders, not to mention the overwhelming endorsement from domestic
shareholders," said Lee Seung-hoon, head of investor relations and head of
mergers and acquisition.
Sovereign, Wellington Management Co. and other overseas institutional
investors hold 54 percent of voting shares in the oil refiner, up from 44
percent a year ago.
Affiliates and allies such as local funds and banks that declared support for
Chey control about 35 percent of the stock, against Sovereign's 14.85 percent.
None of SK Corp.'s overseas investors publicly backed Sovereign. Prudential
Asset Management Co., a Korean unit of Prudential Financial Inc., which owns
0.18 percent of SK Corp., was the only local fund to declare support for
Sovereign but decided not to cast a vote one day before the meeting.
About 92.13 percent of shareholders with voting rights were represented at
the meeting, presided by Chief Executive Officer Shin Heon-cheol.
The shareholder vote was part of a two-year campaign by Sovereign Chief
Executive James Fitter to remove Chey, the 44-year-old nephew of SK Corp's
founder, who is on bail while appealing a conviction for accounting fraud.
Sovereign immediately expressed disappointment with the voting results. "We
regret SK Corp.'s shareholders lost an opportunity to select a more ethical and
capable leader at today's meeting," said Sovereign in a statement released by
Seoul-based Access Communications.
Sovereign garnered 37.8 percent of the votes in favor of its resolution to
remove Chey.
Sovereign also failed to prevent the appointment of Kim Jun-ho, SK Corp.'s
proposed replacement for Yu Jeong-Jun, an executive director whose term ended
yesterday.
The investment fund said Kim, a former criminal prosecutor, lacks work
experience in the oil business.
Analysts said the reappointment of Chey reflects shareholders' positive view
on the management efforts to improve corporate governance practices and
financial performance under Chey's leadership.
"The message is simple. If you want to escape the hostile takeover, prove
your willingness to improve corporate governance," said Chung Kwang-sun,
president of Korea Corporate Governance.
Sovereign's tenacious pressure for better corporate governance has pushed SK
into overhauling its corporate governance practices, he added.
The re-election of Chey also should give SK Corp. more leeway to focus more
on its core business as the brisk outlook for the oil refining sector is
expected to maintain strong momentum, analysts said.
SK has been distracted by a battle with Sovereign over management control.
Since November, Sovereign has engaged in a lawsuit and a series of court
appeals to seek an extraordinary shareholder meeting aimed at unseating Chey.
SK officials said the company is planning to overhaul the personnel of its
affiliates and revamp the organization in the coming weeks. SK is also planning
to strengthen the role of board of directors in the decision-making process,
bolster its global operation and secure management control by expanding its
share holdings of affiliates.
Some market participants have speculated that Sovereign may sell its shares
for profit taking. Earnings have climbed to a record high and the stock has
risen six-fold since Sovereign bought shares of SK Corp. in 2003.
Sovereign, based in the United Arab Emirates, bought its shares at an average
of 9,000 won a share at that time.
The huge capital gain may prompt the fund to sell its holdings, said
analysts, referring to the investment case of Sovereign in Japan.
Sovereign bought a 5.9 percent stake in Japan's UFJ Holdings Inc. in early
2003 and sold the stake a year later, after the price had risen to about five
times the estimated purchase price.
Shares of SK Corp. traded around 63,900 won yesterday.
Sovereign last month unveiled a surprise investment plan in LG Group, a top
10 conglomerate. Sovereign has increased its stakes in two key LG companies, LG
Electronics Inc. and LG Corp. to 7-percent levels, respectively.
The stake purchase has made Sovereign the second-largest shareholder of LG
Electronics, Korea's No. 2 electronics company
Sovereign was founded by New Zealand brothers Richard and Christopher
Chandler. |