DSME hit by leadership row

Daewoo Shipbuilding & Marine Engineering is being hit by growing uncertainty about its new leadership, sapping staff morale.

“Although the three-year term of current CEO Ko Jae-ho ends this month, the corporate board hasn’t even started discussions on his successor for the next three years,” Kim Sang-soo, a DSME union member, told The Korea Herald.

The situation is unusual for the company. Previously, the board started the process for the next CEO appointment at least two months before the incumbent CEO’s term ended.

“We have no idea of whether the board will approve the reappointment of CEO Ko or will look for a new CEO,” Kim said.
 

“One thing for sure is that the union will strongly resist any attempt by the board to appoint a government-backed ‘parachute’ CEO.”

The government’s involvement in the choice of CEO has been a long-held practice in state-run or -invested corporations.

The union’s concern is based on the shipbuilder’s ownership structure. The state-run Korea Development Bank is the shipbuilder’s largest shareholder with a 31.5 percent stake, followed by Financial Services Commission (12.2 percent) and the National Pension Service (8.1 percent).

To solve the issue, industry watchers called on KDB to take action on the issue to minimize its impact on DSME’s businesses.

DSME was the top dog in the nation’s shipbuilding industry last year. The shipbuilder achieved its yearly order target thanks to high value-added LNG ship orders. DSME recorded an operating profit of 471.1 billion won ($420 million) in 2014, up 6.8 percent year-on-year.

“We are concerned about the impact of growing uncertainties involving the top decision-maker on sales activities this year,” a corporate insider said.

CEO Ko Jae-ho and other business division heads are allegedly cautious of pushing for key tasks, holding back their overseas business trips.

The shipbuilder is also keen on possible inquiries from overseas clients over the matter.

“As of today, the board has yet to set up a meeting to discuss additional proposals for votes at the annual general meeting of shareholders to held on March 31,” said Kim Yo-han, a DSME spokesperson.

Industry sources, however, forecast the DSME board is highly likely to set up a meeting to discuss the detailed plan on the next CEO appointment by March 16, two-weeks before the shareholders’ meeting deadline.

By Seo Jee-yeon (jyseo@heraldcorp.com)