"Hyundai Motor Neglects Shareholder Returns"... Governance Forum Proposes Solutions

"BD Stake Should Be Acquired by HMG Global"
"Sell Korea Zinc and KT Stakes for Shareholder Returns"

The Korea Corporate Governance Forum has urged Hyundai Motor Company's board of directors to enhance shareholder value, criticizing the recent lack of effort in this area and calling for greater shareholder returns.

On July 21, the forum made five recommendations to Hyundai Motor's board, stating, "Instead of distributing the remaining 9.65% stake in Boston Dynamics proportionally based on current ownership, HMG Global, which is controlled by Hyundai Motor in the U.S. (with a 49.5% stake), should acquire the entire remaining stake."

The forum pointed out that Executive Chair Euisun Chung’s personal acquisition of a stake in Boston Dynamics undermines shareholder value. Under the Fair Trade Act, it is prohibited to transfer promising business opportunities that can greatly benefit the company to related parties (such as the controlling shareholder’s family) or companies they control. The forum added, "When Mr. Chung personally acquired a 20% stake in Boston Dynamics about five years ago, legal experts raised concerns about its legitimacy," adding, "issues regarding violations of the Fair Trade Act’s ban on business opportunity provision continue to persist."

The forum also demanded the disposal of HMG Global’s stake in Korea Zinc. "HMG Global was established in Delaware, USA, primarily for investment and management in future new businesses, yet it holds a 5% stake in Korea Zinc, which is unrelated to its founding purpose. The current value is about 1 trillion won," the forum argued, demanding, "Sell it immediately on the market and use the proceeds for shareholder returns."

The forum further argued that Hyundai Motor should dispose of its stake in KT. Hyundai Motor currently holds a 5% reciprocal stake in KT. The forum said, "Both companies claim there is a strategic partnership based on their reciprocal shareholdings, but this argument lacks any credibility," adding, "The current value is 700 billion won, and this stake should be sold and the proceeds used for shareholder returns."

The forum also called for the repurchase and cancellation of preferred shares to be prioritized. "In 2024, then-CEO Jaehoon Chang (currently Vice Chair) announced a three-year buyback plan totaling 4 trillion won, emphasizing that preferred share discounts would be considered during buybacks and cancellations. However, this promise has not been fulfilled," the forum stated, adding, "Hyundai Motor must retire all preferred shares with high capital costs for the benefit of shareholders."

The forum criticized Hyundai Motor's excessive construction projects. "The Global Business Center (GBC), scheduled for completion in 2031, is the largest commercial building project in Korea, costing more than 20 trillion won. If we apply a 55% ownership rate at the time of bidding, Hyundai Motor's investment is about 10% of its equity," the forum said. "Hyundai Motor is a mobility company, not a commercial real estate REITs operator. Even now, sell or liquidate part of the GBC stake and reinvest in future mobility," the forum urged.

This content was produced with the assistance of AI translation services.