The First Step of Privatization After the Separation of Ownership and Management

The biggest domestic telecommunication company, KT began to operate as a private company. At 20th, KT opened a temporary general meeting of shareholders at KT Research and Development Center in Umyun-dong, Secho-gu and nominated Lee Yong-kyung, unofficial CEO as the CEO and decided the amendment of prospectus.

Ministry of Information and Communication (MIC) practiced its right as major shareholder (28.4%) and passed the bill. The government sold all of its shares last May, but it could its right as major shareholder on the base of commercial law. Therefore, KT becomes privatized completely since its establishment as Korea Electrical Communication Corporation (= old MIC) after having separated from The Ministry of Post & Communication in December of 1981.

Lee Yong-kyung, the CEO, said, “I will make KT first class company globally by management to focus on the value of shareholder and maximize the value of corporation.”

∇ After KT privatized, what will change= as privatized, KT will be managed autonomously by ordinary shareholders without government intervention. It becomes excluded from the subjects to be supervised by the Board of Audit & Inspection and Parliament Inspection on the base of regulation ‘Restructuring and Privatization of government enterprise’.

As the prospectus was modified, there is no restriction on portion and acquisition of the shares. Additionally, the restriction on foreigner’s possession becomes extended from 37.2% to 49%, so foreigners can purchase 11.8% (37million shares) further. The restriction on a potion of a single shareholder (15%) and purchasing in the floor (5%) was abolished.

However, KT decentralized from intervention and restriction should be responsible for maximizing business value as private company. Lee Young-kyung, the CEO, said, “I will increase the management efficiency by software means such as reallocating and training of human resources rather than hardware means such as decreasing it, etc.”

∇ The separation of ownership and management= KT established expert management system and increased the number of external directors from 7 to 9. Additionally, it established Audit Committee.

The management will agree management contract for management target and the management will be dismissed or receive less remuneration according to their achievement.

The chairman of board of directors that has been held concurrently by CEO will be post by an external director, so a monitoring system on expert management is prepared. There is also a restraint system of major shareholder, SK Telecom. The staffs or managerial officers of rival company can’t be KT’s external director by intensive voting system.

Tae-Han Kim freewill@donga.com