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

Huawei asks US court to overturn ban

The company is suing the FCC, the latest in a series of legal tussles. The legal battle between Huawei Technologies Co and United States government intensified on Thursday. The Chinese tech heavyweight announced a legal challenge to the US Federal Communications Commission, seeking to overturn the latter’s order that bans telecom carriers from buying the company’s equipment via federal subsidies. The move is the latest push by the world’s largest telecom equipment maker to pursue fair competition and treatment amid a slate of restrictions from Washington. Analysts said the FCC ban would have very limited impact on Huawei’s financial performance, but labeling the company as a national security threat would cause far-reaching reputational harm. In a petition filed in the US Court of Appeals for the Fifth Circuit on Thursday, Huawei asked the court to declare the FCC order un


By China Daily
December 6, 2019

Business

Is Vietnam an attractive place for Samsung chip plant?

The tech giant already has manufacturing plants in the country. Is Vietnam a good place for chipmakers to consider building a high-tech plant? In light of a request by the Vietnamese head of state to Samsung Electronics, the world’s largest chipmaker, many in South Korea are asking whether it is a viable business move. In a private meeting held in Seoul on Thursday, Vietnamese Prime Minister Nguyen Xuan Phuc asked Samsung Electronics Vice Chairman Lee Jae-yong to consider building a chip manufacturing facility there. The Korean tech giant already has production plants for mobile phones and other IT devices in the country. Following the re


By The Korea Herald
December 2, 2019

Business

Nepal’s luxury hotels are growing but the rooms are empty

There are 15 five-star hotels in the country, and a dozen more are being planned even as existing hotels continue to report a significant drop in profit. High-end hotels might be proliferating across the country but there aren’t enough guests to fill them up, according to the financial reports of Nepal’s three key five-star institutions. The first quarter financial reports from Taragaon Regency Hotels, Soaltee Hotel and Oriental Hotels, all of which are listed on the Nepal Stock Exchange, showed that profits have taken a nosedive after posting record profits last fiscal year. The first quarter of the fiscal year runs from mid-July to the end of September. The three hotel groups say that unhealthy competition, like price undercutting, a demand-and-supply gap, and a growing number of backpackers are behind the sharp fall in earnings. According to its report, Oriental Hotels, which operates Radi


By The Kathmandu Post
November 21, 2019

Business

Huawei to match Google’s mobile services by Q1 2020

The company to support more Android apps on its phones. Huawei may soon be able to offer Android developers a full range of the essential mobile services required for their apps as the ones provided by Google. This would allow more Android apps to work on new Huawei phones affected by a ban that forbids the use of Google mobile services on these handsets. Mr Zhang Ping’an, president of Huawei Consumer Cloud Service told The Straits Times in an interview at Huawei’s Asia-Pacific Developer Day last Wednesday (Nov 13) that Huawei Mobile Services can “replace 90 per cent of Google Mobile Services by December”. These mobile services from Google and Huawei are used by developers to enable key functions in their mobile apps to, for


By The Straits Times
November 21, 2019

Business

Excessive discounts worked against Nissan Motor profits

The company has been on the back foot since its former CEO was accused of mismanagement. Nissan Motor Co. has reported a massive 85 percent decline in operating profits — an area that indicates the strength or weakness of a company’s main business — in its midterm consolidated financial report for the half fiscal year ending in September. The pursuit of increased sales has harmed profitability, delaying the development of new Nissan models. That in turn has resulted in fewer sales — a vicious cycle the automaker is struggling to escape from. Nissan Motor’s deteriorating business performance may affect its three-way partnership with Renault SA, the French automaker that is its largest shareholder, and Mitsubishi Motors Corp. Failed strategy by Ghosn Nissan Corporate Vice President Stephen Ma, who will become chief financial officer on Dec. 1


By The Japan News
November 14, 2019

Business

US property loses allure for Chinese buyers

Economic factors contribute to falling demand.  Over the past 10 months, Bei Qin, a realtor in Silicon Valley, California, has not had any clients from China, a market that used to be her major source of business. “We had the best business in 2016 and 2017. Every day, we had inquiries from Chinese buyers and every week our WeChat account had more than 10 new subscribers,” said Qin, president of ACEQ Investment Group in Cupertino. “Now those days are gone.” After a decade of increasing investment by wealthy Chinese in residential property purchases in the United States-the biggest proportion of international buyers for seven consecutive y


By China Daily
November 12, 2019