Governance in Brief
April 4, 2019 | Editor: Martin Wennerström
Korean Air shareholders oust CEO from board
On March 27, 2019, Korean Air Lines Chairman and CEO Cho Yang-ho was removed from the company’s board of directors, after narrowly failing to win his reelection vote. The voting outcome has been widely perceived as a turning point in South Korea’s corporate governance, as Cho is reportedly the first founding family member of a chaebol to be ousted from the board. The latter was indicted for embezzlement and other charges in October 2018, while his two daughters have been embroiled in highly-publicized scandals, most notably the 2014 “nut rage” incident. South Korea’s leading institutional investor National Pension Service (“NPS”), which holds a 11.70% stake in Korean Air, had announced before the meeting it would vote against Cho. The pension fund only recently played a key role in fending off Elliot Management’s attempt to install new board members and boost dividends at South Korean carmaker Hyundai, being the second-largest shareholder in both Hyundai Motor and Hyundai Mobis. As South Korea faces mounting scandals involving its chaebols, it remains to be seen whether the NPS will take a more active role in the country’s corporate governance, after having adopted a stewardship code in July 2018.
Renault reportedly eyes Nissan merger and Fiat acquisition
Several press outlets are reporting that Renault wishes to merge with its alliance partner Nissan. According to the as yet unconfirmed reports, the merger would be a prelude to a later acquisition of Fiat Chrysler. Both actions had been on Carlos Ghosn’s agenda before his November 2018 arrest. Ghosn had long seen such an upscaling as a means of competing with other global automakers such as Toyota and Volkswagen. These reports notwithstanding, there are plenty of hurdles that would need to be surmounted for these plans to be pulled off. Since Ghosn’s ouster, Nissan has redoubled its efforts to achieve a more equitable share of influence within the alliance. Meanwhile, the plans would likely dilute the French State’s ownership in the combined entity, a development that may be untenable in Paris. More details may emerge following the AGM season, at which point the alliance members will have settled into their new governance structures.
Germany’s Merck hits US group Versum with hostile bid
On March 26, 2019, German pharma conglomerate Merck KGaA announced it will take its bid for Versum Materials directly to shareholders, going hostile in its attempt to break up the latter’s pending merger with Entegris. Versum’s board had unanimously rejected Merck’s unsolicited offer on March 1, adopting a poison pill one day after receiving the buyout offer. Apparently in response to criticism over the takeover protection, which allowed existing shareholders to purchase Versum shares at a discount if a potential bidder acquired 12.5% or more of the company’s outstanding shares, Versum announced the termination of the poison pill on April 2. Versum shareholders will vote on the Merck and Entegris offers at the special meeting scheduled to take place on April 26, 2019.
Swedbank dismisses CEO
Swedbank ousted CEO and president Birgitte Bonnesen shortly before the commencement of its annual meeting on March 28, 2019, amidst the escalating money-laundering scandal involving Danske Bank’s Estonian branch. The move was apparently in response to statements from three of the country’s largest pension funds, holding a combined 16% stake in the bank, announcing they would not approve the CEO’s discharge. CFO Anders Karlsson was appointed as acting CEO, whilst the bank announced it had initiated the search for a permanent CEO.
As Swedbank faces criticism over its handling of the money laundering controversy, indications have emerged that shareholders could push for more changes at the bank’s helm.