Chairman Chung Bought Out Majority of Stake and Grabbed Control of Hyundai Group

As Chung Sang-young, the honorary chairman of Kumgang Korea Chemical Co. (KCC), announced his official stance to maintain the leadership of chairwoman Hyun Jeong-Eun, disputes about the managerial control of Hyundai Group seem to have temporarily stabilized.

But as Chung revealed his will to wield power as the regent, saying, “I will play the role of major shareholder and continue the Hyundai Group’s legacy,” Hyundai Group seems to be going more under Chung’s influence.

In Particular, as Chung acknowledges the leadership of Hyun only conditionally, Hyun’s position will become more difficult. Some people expect that the removal of the “retainer group,” with whom Chairman Chung has been unpleasant, is coming soon.

Because of this, although Hyundai Group officials heaved a huge sigh of relief as Chung took a step backwards with the official announcement, they are all carefully watching the progression of the situation.

Chairman Chung, advantageous with the shares?: KCC admitted that “the real owners of Shinhan BNP Paribas’ private fund were Chung and the owners of the Hyundai Group. Chairman Chung has a clear advantage in terms of ownership stake.”

As a result, Chung seems to have succeeded in incorporating the control of Hyundai Group under the “Chung family” influences through the buy-out by KCC and Hyundai Group owners. Also, he is seen to have settled the dispute by maintaining Hyun as the nominal chairwoman.

However, some stock market officials assert that Chung and the owners of Hyundai Group violated the rules even though they are required to disclose any change in stock ownership of more than 1 percent if they have a special relationship with Hyundai Elevator and if their original stake was more than 5 percent. If they violated the rules, they lose the voting rights of the portion of shares over 5 percent. Furthermore, if the Financial Supervisory Commission (FSC) decides that the charges are serious, it can order the sale of the shares.

Co-management?: It seems that Chung pushed the co-management idea forward rather than direct confronting them because of this weak point. Chung probably wants to sell the stake possessed by the fund to himself and his affiliates and wield the influence publicly, but it is also difficult because the stock price has risen too much. Furthermore, he can’t help but pay attention to the public criticism that he snatched the managerial control from his niece-in-law by secretly buying out the shares.

Because of this, it is most likely that the disputes will be settled so that there is co-management from both sides.

The removal of the retainer group: The reason why the conflict grew between the two sides is said to be due to Hyun’s refusal to remove the retainer group despite Chung’s request.

Chung’s affiliates said that Chung is very displeased with the retainer group because they plunged the Hyundai Group into a crisis by misleading Hyundai in its business with North Korea. Therefore, if Chung places his position on a solid basis, large-scale reshuffling of the management and a subsequent storm in personnel management are anticipated.

Once Chung’s removal of the retainer group is realized, the conflicts between incumbent managements and Chairman Chung will loom again.

Do-Young Kim nirvana1@donga.com