KT Corp in turmoil as shareholders overturn CEO succession

A governance crisis gripping KT Corp has left it without a CEO and just one external director.

Three independent directors resigned ahead of the Korean telco's AGM last Friday after the biggest shareholder, the National Pension Service (NPS), opposed the reappointment of two of them.

Yun Kyoung-Lim, KT president and head of transformation, withdrew his nomination to become CEO last week after he too had been unable to win over the key shareholders.

Figure 1: KT is facing leadership uncertainty.
(Source: Newscom / Alamy Stock Photo)

Behind the crisis appears to be the heavy hand of the government and its influence on the big shareholders – the NPS, Hyundai and the Shinhan Bank – which between them own more than a fifth of the company.

With the stock down more than 14% since the crisis began in December, investors are angry. Some were seen shouting during the AGM over the mismanaged CEO nomination process and the slide in the share price.

As business website The Investor described it: "More than two decades after its privatization, the government's political clout still seems to permeate the company, and investors are outraged by a recent plunge in share prices."

Stock price doubled under Ku

The drama at Korea's biggest telco began unfolding four months ago when NPS said it would oppose the reappointment of CEO Ku Hyeon-Mo.

Ku, a company insider, had been a successful leader, doubling the stock price and boosting operating profit by 46% in his three-year tenure. He withdrew his nomination in February and last week resigned as CEO just three days before the end of his tenure.

In response, the company created an emergency management committee, led by corporate planning head Park Jong-Ook as interim CEO, to run the business. It said it aimed to provide an effective governance structure that would enable the company to make a "prompt recovery to normal management."

The company said it would restart the CEO search by tapping new external directors to run the appointment process, which would take about five months to complete. But some industry insiders warned the number of vacant positions and the complexity of the process meant it was likely the leadership vacuum would last for most of the year, The Investor reported.

Lawmakers from President Yoon's People's Power Party have pushed back against claims of influence, saying KT's internal processes are not transparent and that nominations for the top posts should be competitive.

Interim CEO Park told Friday's AGM the company would launch a task force to establish a new governance structure to prevent "revolving door" appointments.

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— Robert Clark, Contributing Editor, special to Light Reading