“Expertise in Information & Communications” Removed from Qualifications for KT CEO, Fueling Concerns of Favoritism

KT removed “expertise in information and communications” from the list of qualifications for its CEO, stipulated in its articles of association, the basic regulations of the corporation. On the outside, the company claimed there was a need to fuse with various industries beyond information and communications, its main line of business, but some suspect it was to enable favoritism, allowing a candidate recommended by the ruling People Power Party or government to be appointed as CEO.

The company also changed its standard in appointing a new CEO, who will now need the votes of 60% or more of the shareholders present at the general meeting of shareholders. This could increase the likelihood of the National Pension Service--KT’s largest shareholder and a public agency heavily influenced by the government--intervening in the appointment of the company’s CEO.

On June 8, KT announced its revised articles of association to improve its corporate governance with “expertise in information and communications” missing from the qualifications for CEO. The current articles of association state “factors that can evaluate the professional knowledge and experience in the field of information and communications” as a main qualification for CEO, but in the revised regulations, the company replaced this with a broader concept, “industrial expertise.” At the same time, the new regulations presented expertise in corporate management, leadership, and communications capacity as the main qualifications.

The New Governance Task Force, which oversaw the amendment of the articles of association, concluded that the item in question was an obstacle in recommending the right person for the job, claiming that the recent trend in the information and communications industry, which is KT’s main business area, is to merge with various industries. They argued that the latest decision reflected the current situation, in which KT is expanding its business to artificial intelligence (AI) and digital transformation (DX).

However, the new articles of association can be misused as a tool to justify favoritism, allowing a figure recommended by the ruling PPP and government to lead KT. In the previous race to appoint the new CEO of KT, Yoon Jin-shik, former minister of trade, industry and energy, was excluded in a review of candidates because he lacked expertise in information and communications, and the latest revision seems to have taken this into account.

If the new CEO has no understanding of information and communications, then he will have to spend time figuring out the business status in his early days in office. Even the company’s expansion into other business areas requires expertise in information and communications, since the new endeavors are mostly grounded on wired and wireless communication.

A KT representative explained, “We did not leave out expertise in information and communications. We expanded it to expertise in industry in general,” and said, “The position requires an understanding and related experience in the overall businesses of the group such as finance, media, and real estate, as well as communications.”

KT also decided to appoint the next CEO with the votes of 60% or more of the shareholders present in the general meeting instead of the current 50% or more. If a candidate seeks a second term, he can become CEO only when he obtains the support of two-thirds or more of the shareholders with voting rights.

Ostensibly, the latest change seems to meet the need for a CEO with the capacity and leadership to handle parties with various interests, such as major shareholders, foreign shareholders, and minority shareholders. The task force saw a need for a high level of support from shareholders to guarantee strong leadership from the next CEO, after former CEO Ku Hyeon-mo and former president Yun Kyung-lim resigned their candidacy.

But the new standard will give more clout to the National Pension Service, the largest shareholder, and Hyundai Motor Group and Shinhan Bank, the second and third largest shareholders respectively, when appointing the CEO. The National Pension Service already opposed former CEO Ku serving a second term, so the possibility of a state agency interfering with the management of a private corporation cannot be ruled out.

The company also decided to merge its existing CEO candidate review board with the outside director candidate recommendation board into the director candidate recommendation board, composed of all outside directors, for the purpose of securing fairness in the management and review of CEO candidates. It was a move to prevent “internal cartels” that mention former and incumbent KT executives as strong candidates. The director candidate recommendation board will also oversee the task of training successors, the role of the existing corporate governance board.

On Thursday, KT also announced seven outside director candidates. As new outside directors, the company appointed Kwak Woo-young, former director of the Vehicle IT Development Center at Hyundai Motor Company; Kim Seong-cheol, professor of media at Korea University; Ahn Yeong-kyun, former CEO of Samil PWC Accountings; Yoon Jong-soo, former vice minister of environment; Lee Seung-hoon, partner and head of Global Business at KCGI; Cho Seung-ah, a professor of business administration at Seoul National University; and Choi Yang-hee, former minister of science, ICT and future planning.

Yoon and Choi served in a high-ranking public office in the Lee Myung-bak government and Park Geun-hye government respectively. Yoon is currently a member of the 2050 Carbon Neutral Green Growth Committee, directly under the president in the Yoon Suk-yeol government. Professor Kim Seong-cheol is on the Media Content Industry Integrated Development Committee, a private-public joint committee. Kwak worked for Hyundai Motor Company, the second largest shareholder of KT. Lee Seung-hoon was the executive director overseeing mergers and acquisitions at SK Telecom, KT’s competition.

The seven outside director candidates were finalized after discussions with an advisory board and the outside director candidate recommendation committee on some forty candidates including nineteen recommended by shareholders. The government and PPP had criticized the incumbent executives of KT who exerted influence for forming a “league of their own,” and perhaps aware of such criticism, the company excluded its directors in the outside director candidate recommendation committee, unlike in the past.

The board of directors is expected to have a stronger presence in the management of KT in the future, so the role of the outside director will be more important. The company reduced the number of its directors on the board from three to two to strengthen the supervision of management by a board centered on outside directors. When the appointment of the seven outside directors is passed in the general meeting of shareholders, they will work as members of KT along with Kim Yong-hyeon (a lawyer at DR & AJU LLC), the chairman of the board.

The latest amendment of the articles of association and the appointment of seven new outside directors will be put to a vote in the general meeting of shareholders scheduled for June 30. The amendment is subject to a special vote, requiring the support of two-thirds or more of the shareholders present, while the appointment of outside directors is a general agenda, needing the support of only half or more of the shareholders present. The KT representative said, “We plan to quickly proceed with procedures to appoint a new CEO led by the board of directors composed of new outside directors.”