S. Korea Pension Advisor Backs Hyundai over Elliott | Be Korea-savvy

S. Korea Pension Advisor Backs Hyundai over Elliott

Hyundai Motor Group's headquarter buildings in Yangjae, southern Seoul. (Yonhap)

Hyundai Motor Group’s headquarter buildings in Yangjae, southern Seoul. (Yonhap)

SEOUL, Mar. 13 (Korea Bizwire)The main advisor of South Korea’s national pension service sided with Hyundai Motor Co. and Hyundai Mobis Co. on Wednesday in the ongoing disputes with Elliott Management over dividend payments and appointments to the board of directors.

The Korea Corporate Governance Service (KCGS) recommended that shareholders of the two key affiliates of Hyundai Motor Group vote against Elliott’s request for a combined 8.3 trillion won (US$7.3 billion) in dividends this year at a shareholders meeting next week.

Hyundai Motor offered to pay 1.1 trillion won to shareholders this year, and Hyundai Mobis offered to deliver a total of 1.1 trillion won in dividends over the next three years.

“Dividends should be delivered depending on a company’s long-term payout policy. The dividend plans (suggested by Hyundai Motor and Hyundai Mobis) appear to meet the companies’ long-term plan to enhance shareholder value,” the KCGS said in a report.

The KCGS also urged Hyundai Motor and Hyundai Mobis’ shareholders to stand against the candidates proposed by the U.S. activist investor to be outside board directors at the firms “on concerns of possible conflict of interest, leakage of technology and unnecessary managerial intervention.”

The Elliott nominees currently serve key posts at companies that develop hydrogen fuel cells, manufacture electric vehicles or provide information and communication technology services, according to Hyundai Motor Group.

The KCGS’ view is echoed by local advisors such as Sustinvest and Daishin Economic Research Institute.

“Excessive dividends could hurt a company’s mid and long-term value, and the dividend request by Elliott was not based on the Hyundai affiliates’ earnings last year,” Sustinvest said.

For the whole of 2018, Hyundai Motor’s net profit plunged 64 percent on-year to 1.645 trillion won. Hyundai Mobis’ rose 21 percent to 1.888 trillion won.

Daishin also said paying the dividend requested by Elliott will make it hard for Hyundai to make investments in facilities, research and development activities critical for growth.

Hyundai Motor and Hyundai Mobis have been in a back-and-forth dispute with Elliott over their dividend plans and appointments for board members, with the New York-based hedge fund seeking to obtain seats on the key body.

Elliott has recently proposed three experts to join Hyundai Motor’s board, which will expand to 11 from nine this year, and two to join Hyundai Mobis’ board as outside directors. The experts include Robert Randall MacEwen, chief executive officer of Ballard Power Systems, Inc., and Robert Kruse, chief technology officer of U.S.-based Karma Automotive.

Proxy advisory firm International Shareholder Services (ISS) recommended that shareholders vote for two of the three Elliott nominees to be outside directors at Hyundai Motor. ISS also recommended shareholders support the two Elliott nominees to be Hyundai Mobis board members on the condition that the board expands from nine to 11 directors.

Another proxy advisor, Glass Lewis, however, recommended that Hyundai Motor and Hyundai Mobis investors vote against all five of the Elliott nominees and the New York-based hedge fund’s dividend request.

All eyes are on the shareholders meeting on March 22, when investors in Hyundai Motor and Hyundai Mobis have a chance to vote on the respective proposals made by Elliott and the firms.

Last year, Elliott’s opposition made Hyundai Motor Group drop its attempt to overhaul its governance structure, which could have helped Executive Vice Chairman Chung Euisun take over the country’s second-biggest family-owned conglomerate from his father Chairman Chung Mong-koo.


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