An Overwhelming Victory for Mr. Chey

The chairman of the SK Corporation, Chey Tae-won, won an overwhelming victory in defending the control of the company against Sovereign Asset Management (Sovereign).

On March 11, in an annual general shareholders’ meeting held at the Sheraton Walker Hill Hotel in Gwangjang-dong, Gwangjin-gu, Seoul, 60.63 percent of shareholders voted yes for Chey to be reelected as the chairman of SK Corporation.

After the general shareholders’ meeting, Chey was reelected chairman and CEO by the board of directors.

Sovereign Asset Management was expected to have a close competition with SK Corporation, but SK won more easily than expected.

In a vote to ask whether shareholders wanted Chey to remain in the chairman’s seat, shareholders with a total of 70,318,861 shares (60.63 percent) voted yes, compared to those with a total of 44,261,154 shares (38.16 percent) who voted no. Those with 1,391,835 shares abstained from the vote.

In the run-up to the vote, the COO of Sovereign, David Mapplebeck, argued “To re-elect a person who was found guilty of corporate fraud as chairman defies common sense. At the end of the day, voting out Mr. Chey will do much good to SK,” said Mapplebeck. However, he failed to win the vote.

Chey’s victory owes much to Samsung Electronics Co. Ltd and Pantech and Curitel, who came forward as a white knight, and to 36 institutional investors, including Korea Investment Trust Management and Chohung Investment Trust Management, who voted for the chairman.

Many analysts say not only institutional investors, but also many foreigners and small investors were in favor of Chey.

In fact, shareholders with only a 15.71 percent stake, including SKC&C (11.3 percent) and Chey himself (0.83 percent) had special and direct interests in SK, but many more investors supported Chey.

The management with the chairman as the central figure could win in the vote against Sovereign, thanks in large part to SK’s vigorous business performance.

SK Corporation achieved a record high in business performance in 2004, posting 17.39 trillion won in sales, 1.61 trillion won in operating income and reached an all time high of 1.64 trillion won in net income.

On the outcome of the vote, Sovereign expressed disappointment.

Chief Executive Officer James Fitter criticized, saying, “SK Corp. lost an opportunity to have a leader with integrity, and the outcome means a backward movement for the Korean capital market.”

Last November, when Sovereign filed a petition to the court to hold an ad hoc general shareholders’ meeting, the court turned down its petition for an approval one month later. However, the corporation plans to push for more legal processes to hold a shareholders’ meeting, leaving a chance of disputes regarding SK.

But considering the defeat of Sovereign after most institutional investors turned their back, Sovereign’s ground will weaken more.

Meanwhile, Chey, with strong support from shareholders, is expected to bolster his stance in management and come to the fore in various social activities, as well as become free from burden he suffered during disputes over the control of the company with Sovereign.