Sovereign Demand Independent Management for SK Corporation

Sovereign Asset Management, a mother company of Crest Securities which is a major shareholder of SK Corporation made an official demand on April 8th that SK Corporation distance itself from other affiliates and manage itself in an independent way.

Sovereign made this announcement to stop SK Group from helping SK Global by launching a task force team for SK Global`s management normalization. Sovereign said in a statement titled “Sovereign`s Position To Improve The Governance Structure of Korean Enterprises”, “Under the current situation where SK Global are accused of many scandals and SK Shipping is alleged to have window-dressed its accounting, SK Corporation should not involve with such affiliates to keep its name intact.”

Sovereign also said, “SK Corporation should not suffer from SK Group`s scandals any more. It should go on its own way.” The statement implied Sovereign`s opposition of SK Corporation`s support for SK Global and Sovereign`s intention to separate SK Corporation and SK Telecom from SK Group.

Sovereign also added, “Our goal for SK Corporation is to make it a standard model for changes. Shareholders and creditors of SK Corporation should focus on recovering its profitability and credibility by improving its corporate governance structure through strong measures implemented by management.” It suggested that the management of SK Corporation should set up an independent outside board of director and an audit committee. It also said, “We should make up a business plan that can establish a clear bench-mark model on Return on Equity (ROE) for new investments” implying that it would rearrange SK Corporation based on detailed profitable business plans.

A Head Managing Official of Sovereign James Peter said, “We had discussion with the management of SK Corporation several times and hope to have more constructive discussion within the coming few weeks.”

Myung-Jai Lee mjlee@donga.com