Leadership challenge intensifies family feud at Kumho Petrochemical

A nephew is challenging the leadership of his uncle, incumbent Chairman Park Chan-koo, at Kumho Petrochemical, launching a campaign to win the support of shareholders Wednesday.

Park Chul-whan, the company’s largest shareholder with 10 percent of the shares, opened a website for his shareholder proposal in which he claimed that mismanagement was blocking growth of the company and suggested the direction that the company should go to increase its value. 

The younger Park is the son of the late Kumho Group Chairman Park Jeong-koo, who is the older brother of the incumbent chief. 

“This proposal is made as the first step to increase the value of the company,” the younger Park said in Wednesday’s proposal. “The company needs rational decision-making on investment to normalize the dividend payouts, to utilize sources efficiently and to bring new growth engines for the future.” 

Park Chul-whan, who works at the company as a managing director, has been seeking a greater role in company management. 

Chairman and CEO Park Chan-koo and his family, including his son Park Jun-kyung, hold a combined 14 percent stake in the company. 

The National Pension Service has 8 percent of the shares, and nearly 50 percent are held by retail investors.  

In his proposal, Park Chul-whan is demanding five seats in the boardroom, one for himself and four for outside directors of his appointing. He is also pushing for a revision of the corporate charter to allow an outside director to assume the role of the board chairman. 

Currently, the chief executive officer doubles as head of the directors’ board. 

From this, Park is practically pressuring his uncle to step down as board chairman.   

To shareholders, he has promised a set of reform measures to enhance Kumho Petrochemical’s market value, saying though the company has been doing better than its rivals in terms of profits, mismanagement has led to an undervaluation of the company’s stocks over the past 10 years. 

For the factors holding back the growth of the company, Park Chul-whan pointed to excessive cash holdings, unfriendly shareholder policies and inappropriate investment decisions. 

To solve the problems, financial solvency should be put as the priority, and the company should proceed with retirement of treasury stock and promote listing of affiliate companies, Park said.

  Acquiring money from the aforementioned actions, Park Chul-whan said they should raise the dividend payout ratio from the current 10 percent to 50 percent, which is the average payout rate for rival firms. 

He also said he would make investments to start new businesses, to create synergies with existing businesses, such as secondary battery and hydrogen fuel cells, and to acquire new growth engines. 

“This proposal was based on a long period of deliberation for the sole purpose of enhancing long-term corporate and shareholder value, from the standpoint of a senior executive and the largest shareholder of Kumho Petrochemical,” he said. 

The challenger seeks for his suggestions to be put to a vote in the general meeting of shareholders that is expected to take place next week. 

The South Korean company manufacturing synthetic rubbers, synthetic resins and rubber chemicals witnessed a record operating profit of 742.1 billion won ($662 million) in 2020, more than double from the year before at 365.3 billion won, with demand raised over NB latex amid the COVID-19 pandemic. 

Shares of Kumho Petrochemical closed Wednesday 8.37 percent higher at 226,500 won.

By Jo He-rim (herim@heraldcorp.com)