See More on Facebook

Business

The shameful fall of Korean Air chairman

Scandal-ridden Korean Air chief ousted from board of directors.


Written by

Updated: March 28, 2019

After years of being mired in controversies and scandals fit for a soap opera involving himself and his closest family members, Cho Yang-ho, chairman of South Korea’s largest air carrier, lost his board seat Wednesday after shareholders voted against extending his term as a director.

Although he retains his management rights with shares held by his family, Cho becomes the first conglomerate chief ousted since the nation’s pension fund decided to actively exercise voting rights last year for responsible investing.

On Wednesday morning, Korean Air shareholders voted against the airline’s proposal to extend Cho’s term as a board director for three years, with 64.1 percent in favor and 35.9 percent against during the regular shareholders meeting. Cho needed 66.66 percent in favor to retain control.

The dismissal of Cho had been expected, as the National Pension Service, which is the second-largest shareholder of Korean Air with a stake of 12.45 percent, decided against extending his term Tuesday on grounds he has a record “of undermining corporate value and infringing upon shareholder rights.”

The ownership family of Hanjin Group, which holds Korean Air, is embroiled in allegations of embezzlement, tax evasion, smuggling, assaults and illegal hiring.

Cho has been accused of evading inheritance taxes and embezzling company funds. His wife has been accused of multiple assaults on employees, some of which were caught on camera, and illegally hiring foreign housekeepers.

His two daughters also underwent investigations by law enforcement last year on similar assault charges. His first daughter Hyun-ah sparked outrage in the “nut rage” incident in 2014 by throwing a fit at cabin crew on her flight. The second daughter was embroiled in a “water rage” incident, for purportedly abusing an employee of a contracted ad agency.

The Cho family has become the main symbol of “gabjil,” where those with higher business status abuse their influence over those of inferior status.

The scandals have also raised concerns among investors for potentially hampering the airline and further, the group, with high risks associated with the ownership family.

The NPS decision was also considered to be in line with global and local advisers and foreign pension services.

Earlier, global and local advisers — Korea Corporate Governance Service, Institutional Shareholder Services and Sustinvest — all recommended the NPS vote against Cho’s re-election.

Foreign public pension services, including the State Board of Administration of Florida, Canada Pension Plan Investment Board and British Columbia Investment Management Corporation, shared the same view.

For the nation’s pension fund, the third-largest in the world with 640 trillion won ($571 billion) in assets, Korean Air was the first company put to the test since the adoption of the stewardship code last year that acts as a guideline for institutional investors to actively participate in corporate governance.

The NPS adopted the code under growing pressure to apply stricter yardsticks on their investments, with growing risks from owners resulting in revenue and stock price drops.

Korean Air said, “Extending Cho’s term was voted down today. This is the loss of a director position and this does not mean the loss of his management rights.”

Cho’s family still retains a 33.3 percent stake of Korean Air and first son Cho Won-tae currently serves as a CEO of Korean Air. The ownership family also has a 29 percent stake in Hanjin Kal, the holding company of Korean Air.

Park Ju-gun, head of corporate analysis firm CEO Score, said Cho’s dismissal as director sends “a significant signal” to Korean conglomerates with the message that owners can also be ousted for wrongdoings.

There are currently 297 companies, including Samsung Electronics, Hyundai Motor, SK hynix, Naver and Posco, in which NPS holds more than 5 percent of shares.

On Tuesday, the NPS also voted against the term extension of SK Group Chairman Chey Tae-won, citing damage to shareholder rights and corporate value. Chey, on the other hand, was approved to extend his term during the firm’s shareholders meeting Wednesday.



Enjoyed this story? Share it.


The Korea Herald
About the Author: The Korea Herald is the nation’s largest English-language daily and the country’s sole member of the Asia News Network.

Eastern Briefings

All you need to know about Asia


Our Eastern Briefings Newsletter presents curated stories from 22 Asian newspapers from South, Southeast and Northeast Asia.

Sign up and stay updated with the latest news.



By providing us with your email address, you agree to our Privacy Policy and Terms of Service.

View Today's Newsletter Here

Business

Putin says US’ Huawei stance aims to contain

Huawei has come under increasing pressure from the US and its allies. The United States was seeking to contain China’s development when it took action against Chinese telecom giant Huawei, and it is doing the same thing to Russia, according to Russian President Vladimir Putin who made the comment during his annual televised Q&A with the Russian people on Thursday. He said the US had targeted Huawei because China has become the US’ rival. “Let’s take the attack on Huawei: where did it come from and what is the reason behind it? The only reason is to contain the development of China who has become a global rival to another global power-the United States,” Putin said. The Russian president said the West has no interest in changing its attitude toward Russia, and therefore Moscow will not compromise on its fundamental national interests in the face of sanctions.


By China Daily
June 24, 2019

Business

Huawei CEO holds dialogue with US tech experts

The company has come under pressure after the US singled the company out for possible espionage for Beijing. Huawei founder and CEO Ren Zhengfei had a discussion with two American technological gurus, George Gilder and Nicholas Negroponte, at the company’s headquarters in Shenzhen on Monday. Ren said he believes the artificial intelligence industry is a driving force for human society, and people need to be inclusive and not regard AI as “negative” future technology. Ren said that Huawei has been committed to business ethics and compliance with laws and regulations since the company was started. “Huawei didn’t, and w


By China Daily
June 19, 2019

Business

Vietnam to be among world’s most dynamic markets by 2030

The country has reached amazing levels of progress in the last two decades. With an emerging market economy and continued strong growth, Vietnam is set to become one of the most dynamic markets in the world by 2030, according to Euromonitor International, a global market research company. An Hodgson, Euromonitor International’s income and expenditure research manager, said the company’s research database showed that urbanisation, with the associated concentration of income, wealth and population, would propel Việt Nam’s commercial success by 2030. Published last month, the research database has found that Vietnam will be the third biggest urban market by consumer numbers and fifth biggest by total spending in Southeast Asia. By 2030, the country’s urban consumer market will expand to 46 million consumers and $169 billion worth of spending. GDP growth is expected to rea


By Viet Nam News
June 13, 2019

Business

Li pledges to improve business climate

Li Keqiang says China taking steps to open up economy to foreign businesses Premier Li Keqiang reaffirmed China’s commitment to improving its business environment by deepening reforms to streamline administration and carrying out large-scale tax cuts and fee reductions. Li said in a meeting on Tuesday with World Bank President David Malpass that the country will bring its business environment more in line with market principles, international standards and the rule of law as part of efforts to promote high-quality development. He noted China’s cooperation with the World Bank, which is in keeping with its steps in reform and opening-up and benefited the country’s growth. The global landscape is complex and fluid, and the Chinese economy is facing various risks and challenges, he said. Further cooperation between China and the World Bank will help promote poverty reduction, narrow


By China Daily
June 12, 2019

Business

Restrictions on Chinese firms could drive up 5G cost

China is increasing pressure on consumers in a bid to end restriction on its major tech firms. Europe would have to pay an extra 55 billion euros ($62 billion) for 5G networks and suffer an 18-month technology delay if it bans telecom equipment purchases from top Chinese manufacturers, according to an industrial report. The report by the GSM Association, which represents 750 mobile operators worldwide, said Ericsson, Nokia and Samsung, the non-Chinese contenders in the 5G market, do not have the capacity to handle all of the shift from 3G and 4G networks to 5G in Europe while honoring contracts already signed in North America and Asia. Huawei and ZTE account for about 40 percent of the EU market, and Huawei is “currently a pioneer in 5G technology”, according to the GSM analysis, first reported by Reuters and Agence France-Presse on Friday. “A ban on Chinese v


By China Daily
June 11, 2019

Business

Indonesia wins S&P upgrade as Jokowi victory fuels growth bets

Jokowi’s reelection spells continued growth and continuity leading to the upgrade. Indonesia won a sovereign rating upgrade from S&P Global Ratings for its “strong economic growth prospects” and prudent fiscal policy, brightened by the re-election of President Joko Widodo. The nation’s currency, stocks and bonds rallied. The rating was increased to BBB from BBB- and put on a stable outlook, S&P said in a statement on Friday. The long-term rating may be raised again if Indonesia’s external settings improve materially from their current levels, or if its fiscal settings improve over the next two years, it said. “We raised the ratings to reflect Indonesia’s strong economic growth prospects and supportive policy dynamics, which we expect to remain following the re-election of President Joko Widodo recently,” S&P said. “The sovereign ratings on Indonesia continue to be suppo


By The Jakarta Post
June 5, 2019