Korean activist fund Align Partners has come under increased scrutiny following its failed nomination of a boardroom director at Coway, the home appliance company and the latest target of Align's shareholder activism.
On Monday, Align withdrew its nomination of Lee Nam-woo, chairman of the Korea Corporate Governance Forum, for a position as an outside director and audit committee member on Coway’s board after it was discovered that he already held similar roles at three other companies.
Earlier, Coway argued that Lee was ineligible for the position, citing regulations that prohibit individuals from holding more than two outside director or auditor roles simultaneously.
“We will move forward with full preparations to appoint three outside directors and audit committee members to strengthen the board’s independence,” a Coway official said. "We will enhance our governance practices by appointing qualified professionals with expertise in financial capital and global business."
Ahead of Coway’s general shareholders meeting scheduled for March 31, Align, which holds a 2.84 percent stake in the company, has been intensifying its activist campaign, rallying support from minority shareholders.
Align has called for the adoption of a cumulative voting system for electing board members, arguing that Coway’s largest shareholder, gaming company Netmarble, which has a 25 percent stake, wields excessive control over management.
The cumulative voting system allows shareholders to concentrate their votes on one or more candidates instead of distributing them equally, thereby increasing the influence of minority shareholders in corporate governance.
However, Align’s nomination failure is expected to undermine its activist efforts.
The fund has also recently faced criticism for abruptly withdrawing its demand for Coway to return 90 percent of its consolidated net income to shareholders — more than double the original 40 percent payout plan — without providing a clear explanation.
“If a board candidate is nominated without a basic verification that he or she is legally qualified, it’s only natural that minority shareholders will lose confidence in the fund,” an industry official said.
hykim@heraldcorp.com
