Sovereign Asset Management calls on 'New SK' to demonstrate its commitment to reform at its forthcoming AGM by adopting the popular reform package proposed by Sovereign last year.
Under Korean law, shareholders are debarred for three years from re-submitting proposals considered at a previous meeting. This is despite the fact that last year's proposals were not voted on individually yet still found majority support. Fortunately, this does not prevent the company's directors from voluntarily proposing the adoption of these amendments in order to strengthen SK's corporate governance.
Sovereign chief executive James Fitter explains: "We believe that the amendments proposed by Sovereign last year are now more relevant than ever. The fact that shareholders are not able to resubmit them offers the perfect opportunity for "New SK" to show the extent of its commitment to improving corporate governance. The onus is now very much with SK's board of directors to act."
The board's director nominations will also be closely scrutinised. With Chey Tae-won's chairmanship being one of two positions up for re-election, the AGM is an outstanding opportunity for shareholders to vote specifically on the company's preferred nominees.
Fitter comments: "The investment community will be watching to see whether the board seeks to nominate the most competent and ethical candidates available. Nomination of the incumbent, Chey Tae-won - who has been convicted for his role in a $1.3bn fraud at the group he purports to control - would display a breathtaking contempt for international standards of corporate governance by the board."
In recent weeks SK has been outstripped in terms of market value by S-Oil - despite net earnings that are forecast to be only half those of SK Corp. This dramatically highlights the extent to which SK's value is being destroyed by poor corporate governance.
Sovereign believes the most effective way the SK board can eliminate this discount is to include the following proposals on the agenda for March:
This package is amended to reflect the creation of new committees at SK in the last year. Despite the establishment of a Transparency Committee, no light has yet been shed on the cause of the loss of billions of dollars at the group, or how this will be prevented from recurring again in the future. Fitter points out that SK's new committees are of little value until they act to demonstrate a genuine commitment to reform from within.
While SK has taken the unusual step of adopting a code of conduct for its outside directors, no such code exists by which SK's employees should abide - the adoption and adherence to such a code remains a key test of SK's intent.
Sovereign has written to the SK Corp board detailing its proposals and remains hopeful that they will voluntarily choose to take the necessary steps to add substance to its aging public commitment to improve corporate governance, accountability and transparency.
- ENDS -
