Exchange Bank Takeover Draws Protests

Unionized employees of the Korea Exchange Bank (KEB) who oppose Kookmin Bank’s takeover of KEB waged a silent strike wearing masks with “X” marked on them at the general shareholders’ meeting recently.

In addition, the “Forum of Hope,” a group that supports a decrease in polarization and human rights, held a press conference and called for a thorough investigation into Lone Star’s acquisition of KEB in 2003.

The forum issued a statement saying Lone Star’s acquisition of KEB was an illegal transaction and the product of cozy relations between high-ranking government officials and foreign speculative funds. The current acquisition procedure to the company should be halted, it argued.

Thirty-six figures signed the statement, including Lee Se-jung, chairman of the Community Chest of Korea, Sohn Bong-ho, president of Dongduk Women’s University, Lee Jong-hoon, trustee of Duksung Women’s University, Baek Nak-chung, honorary professor of Seoul National University, Hahm Sei-ung, president of the Korea Democracy Foundation, Park Won-soon, standing director of the Beautiful Foundation, and Moon Gook-hyun, president of Yuhan-Kimberly.

Lee Hyung-mo, head of the steering committee, said, “High-ranking officials’ illegal activity of selling KEB’s management rights cheaply to an unqualified foreign speculative fund threw the public into anger and frustration. The Financial Supervisory Commission should divest the qualifications of the largest shareholder of Lone Star.”

“If the acquisition proceeds as Lone Star intends because the government, the prosecution, the Financial Supervisory Commission do not take necessary steps, we will wage large scale campaign with the public calling for thorough investigation.”

Ugly meeting-

The last shareholders’ meeting of “Lone Star’s KEB” degenerated into a quarrel among shareholders over dividends.

The regular shareholders’ meeting held at the auditorium of KEB headquarters started at first with festivity, celebrating the year of 2005 for recording the biggest net profit in corporate history, but the mood was dampened when minority shareholders and executives voiced their complaints.

Dividend payment was at issue. Minority shareholders opposed the board’s decision not to pay any dividend.

Kim Jeong-jun, director of Korea Export-Import Bank that holds 13.78 percent of KEB shares, said, “KEB is capable of paying dividend worth 950 billion won even after paying accumulated losses with last year’s net profits.” “Therefore, we request dividends of ten percent, the level of dividend at other local banks,” Kim said, submitting the revised resolution. Lee Chang-ki, deputy of the Bank of Korea which holds 6.12 percent, stood with Kim saying “When the lender pays dividend to minority shareholders who bore capital reduction for seven to eight years, stock prices will go up with increased confidence in the market.”

Kim Ju-yeong, a lawyer representing shareholders of unionized employees, pointed out that “the largest shareholder, Lone Star, refuses to pay dividends in fear of falling sale price and to avoid paying taxes on income from stock dividends.”

Robert E. Fallon, chairman of the board of directors, bewildered, put the resolution to the vote but minority investors lost. Since Lone Star holds 50.53 percent of shares, there were no chances of winning for minority shareholders. The meeting ended at 2:00 p.m. after four hours of on-and-off yelling and shouting.

Labor’s Opposition to Acquisition Causes Disruptions in Due Diligence-

Since March 27 when Kookmin Bank planned to start due diligence after being chosen as the preferred negotiator to acquire KEB, the largest lender has had difficulties in conducting due diligence and one-on-one interviews with KEB employees because of KEB labor union’s opposition.

The labor union says that they should not provide crucial information to the rival bank because Kookmin Bank is likely to fail to pass the corporate integration assessment of the Fair Trade Commission based on anti-trust law.

The real reason of their rejecting due diligence is the fear of losing jobs that they could have maintained if Kookmin Bank’s rival bidder, Development Bank of Singapore were chosen.

An official of Kookmin Bank said, “In response to the opposition from KEB’s labor, we are considering undergoing corporate acquisition inspection of the FTC beforehand.