Hankook & Company -- the holding group of the world’s seventh-largest car tire maker, formerly named Hankook Technology Group -- is entangled in an escalating sibling feud ahead of its annual shareholders meeting slated for March 30.
What had started off as a conflict between Chairman Cho Yang-rai’s two sons has now flared into an extensive proxy war over management control. Assuming the defense is Cho Hyun-bum, the youngest of senior Cho’s four offspring and CEO of the group’s flagship tire maker. Raising objection against the youngest brother’s apparent corporate succession are the rest of the siblings -- elder brother Hyun-sik, eldest sister Hee-kyung and remaining sister Hee-won.
The latest action came from Hee-kyung, the eldest of the group and head of Hankook Tire Welfare Foundation, who officially declared herself this week as siding with Hyun-sik, vice chairman of the holding company.
“(The group’s holding company) Hankook & Company and (tire maker) Hankook Tire & Technology currently hold a number of problems in terms of corporate governance and are thus in need of proper surveillance by an external expert,” Cho reiterated in a statement.
Citing the need to safeguard shareholders’ rights and to make the necessary changes in corporate structure, she said that she has decided to stand with Hyun-sik in seating Lee Hye-woong, CEO of BRB Korea Advisers, on the management board and the audit committee.
This signaled a visible shift of stance as Cho’s eldest daughter had earlier been observed to be more focused on the legal guardianship of her father, rather than the corporate management dispute.
Triggering the sibling dispute was Chairman Cho’s decision in July last year to transfer 23.59 percent of the holding company’s shares in an over-the-counter transaction to younger son Hyun-bum. The stakes of the junior Cho, who sits in both the group’s holding company and tire maker as CEO, climbed to 42 percent.
“The decision took place abruptly and apparently did not come in line with my father’s beliefs and thoughts,” his eldest daughter Hee-kyung said, filing for court judgment on her father’s condition.
As a result, the 83-year-old businessman is to face a household investigation on March 10 concerning his physical and mental health, as his daughter filed for an adult guardianship judgment.
Hyun-bum who benefited from his father’s bestowal, on the other hand, raised an objection against his elder sister’s action.
He also recommended Kim Hye-kyung, a former presidential secretary on gender and family affairs, to become a member of the management board and audit committee, to counter his elder siblings’ alliance. The showdown is to take place at the shareholders meeting slated for March 30.
The reason that the tire conglomerate siblings are locking horns over the pick of a nonexecutive director and auditor is the “3 percent rule” that was approved by the National Assembly late last year.
The given rule, stated in the revised Commercial Act, limits the major shareholder’s voting rights to within 3 percent of the stakes when selecting an audit board member.
As both of the Cho brothers’ face limits under the new regulation, minor shareholders may rise as game changers, meaning the winner in the nomination conflict is likely to prove an overriding influence in corporate control.
Besides the heated sibling war, the tire group is also going through a number of debates, including a recent trademark legal dispute and owner-related legal risks.
In 2019, the group changed its name from Hankook Tire Worldwide to Hankook Technology Group under the lead of CEO Hyun-bum, but soon faced a losing trademark lawsuit over its new name. It was forced to swiftly change the name to the current Hankook & Company in order to dodge additional damages compensation.
The CEO was also handed a jail term of three years with a four-year suspension in November last year for taking bribes from subcontractors.
Meanwhile, the company’s net profit for 2020 slipped 12 percent from a year earlier to 379.2 billion won ($337.8 million), largely due to foreign exchange losses caused by dollar appreciation, officials revealed in a statement last month.
Operating profit expanded 16 percent to 628.4 billion won during the same period on the back of strong sales of premium tire products in Europe and the United States.
The company’s target for 2021 is to hoist its sales to 7.1 trillion won, up from 6.45 trillion won in 2020.
By Bae Hyun-jung (email@example.com