SK launches panel to recommend new directors

SEOUL - SK Corp, South Korea's largest oil refiner, said on Tuesday that it has launched an advisory panel to recommend candidates for outside directors to be nominated at its shareholders meeting in March.

The panel consists of five members, including Lee Seung-yoon, a former prime minister, Yang Mahn-ki, the chairman and president of the Export-Import Bank of Korea, and Choi Do-soung, a Seoul National University professor, said SK Corp, the de facto holding company of the South Korea's third-largest conglomerate, SK Group.

The panel's members discussed their future course of action and the requirements for outside directors, the company said. The panel will choose final candidates by next week, and refer them to a six-member upper recommendation committee led by SK Corp chairman Chey Tae-won. In addition, SK Corp on Tuesday began receiving candidate recommendations from individual shareholders via its website.

The launch of the panel is part of a governance-reform package that SK Corp announced on Friday in an apparent bid to counter an attempt by a foreign investment fund to grab managerial control.

In the reform blueprint, SK Corp promised to fill half of the 10-member board seats with outside directors this year and 70 percent by 2006. The company also vowed to set up a committee that will oversee all aspects of company operations and be controlled by outside directors, a measure that could spark drastic changes in South Korea's chaebol business culture, which has long been criticized by corporate governance activists.

The measures came one day after the Monaco-based investment fund Sovereign Asset Management, which owns a 14.99-percent stake - the second largest stake in SK Corp - fielded its own candidates for the company board.

SK Corp and Sovereign have been at loggerheads since the oil refiner provided a bailout to SK Networks, formerly SK Global, and SK Shipping to the tune of around 1 trillion won (US$863 billion), according to a report in the Korea Herald. As a result, Sovereign has pledged to oust SK Corp's current management, including chairman Chey and board members Son Kil-seung and Kim Chang-geun, holding them responsible for the 1.5-trillion won accounting fraud and slush fund scandals involving the oil refiner and its affiliates.

"SK Corp is a potentially great company that deserves a fresh start," Sovereign's chief executive officer James Fitter told the Korea Herald. "It is time to break from the past and revitalize the board of directors to ensure sound stewardship for a healthy future."
However, Cho Dong-sung, one of the five candidates chosen for board directorship by Sovereign on Thursday and a Seoul National University professor, believes there will not be a confrontation between the SK Corp management and Sovereign over managerial rights to SK.

"The SK Corp management led by chairman Chey Tae-won and Sovereign Asset Management will be able to reach a compromise in a manner to maintain Chey's chairmanship and improve the firm's governance structure," Cho told reporters on Tuesday.

"Chairman Chey is competent in management, and it should be admitted that it's better for those who hold a stake in a company to manage a firm," the professor said.

The compromise can be made if the Chey camp can assure Sovereign that they can play a role as a big shareholder properly and that the rigging of financial statements, as for its troubled trading arm SK Global is a wrong practice and vestige of the past, he said.

When Sovereign said those who were criminally punished should not participate on the board it did not target chairman Chey, but intended only to present broader principles in electing directors, Cho said.

He also insisted that Sovereign is an investment fund that aims for more profits by improving corporate governance of the company in which it invests.

"Sovereign has no intention of snatching managerial rights," he said. "I proposed that Sovereign recommend not six, but five candidates for SK Corp.'s directorship to make clear it is not interested in the firm's managerial rights, and Sovereign accepted it," Cho said. 

On the other hand, Kim Sang-jo, director of People's Solidarity for Participatory Democracy, a leading civic organization, insisted that Sovereign is believed to have failed to find the right men in consideration of the background of the five candidates.

"Consequently, we cannot but reach a conclusion that Sovereign does not understand the domestic economic reality fully," Kim said, adding that Sovereign refused Solidarity's arbitration proposal last month when it suggested maintaining Chey's managerial rights. Sovereign had made it clear that it wants to oust Chairman Chey, he said.

"Sovereign earlier said it would recommend six candidates, but was able to recommend five only. That can be interpreted as a failure in finding qualified candidates for their interests," Kim said.

"It seems to be difficult to improve SK Corp's governance with Sovereign-recommended candidates, which will negatively affect both corporate value and the domestic economy," Kim added. And for now, it seems SK Corp has taken the matter into its own hands.
(Yonhap)