Shareholder proposal prompts car maker to set up corporate governance committee
South Korean car manufacturer Hyundai has heeded advice from foreign investors and established a board-level committee devoted to protecting its shareholders’ interests, the company announced this week.
The move comes after Dutch investor APG Asset Management, one of Hyundai’s largest shareholders, submitted a proposal at the automaker’s AGM in March earlier this year to establish a group that would report the company’s activities annually, with a director appointed to look into governance issues for shareholders. The proposal had the backing of 20 Hyundai investors, including JPMorgan and Legal & General.
In a statement released this week, Hyundai says its four independent directors will form a ‘corporate governance and communication committee’ tasked with keeping investors’ concerns at the fore during major business decisions. As suggested by APG, one director – Seoul National University Professor Youjae Yi – will serve as a communication channel between shareholders and Hyundai’s board in an effort to provide a ‘more friendly environment’ for investors.
The proposal to establish the body followed criticism by investors and corporate governance groups when Hyundai and two of its affiliate firms bid $10 bn for the site of a new headquarters in Seoul, which was later revealed to be triple the appraised value of the land. Hyundai’s board allegedly discussed the bid only twice and without knowledge of the deal’s value before it was agreed. Unhappy investors voiced concerns about harming shareholder value and a lack of transparency at the family-run firm.
Hyundai’s co-CEO, Kim Chong Ho, says he hopes the new committee will help the firm’s executives make better decisions. ‘We are actively studying ways to improve shareholder value,’ he writes in a press release announcing the new shareholder rights group.
The company’s share price remains below its value before the land deal was completed, despite attempts by the company to win investors over by increasing buybacks and upping dividend payouts by 54 percent over the last year. Earlier this month, the firm also announced its net profits had declined for the fifth consecutive quarter.