KT CEO nominee may prioritize efficiency-boosting reshuffle

Kim Young-shub, a nominee for CEO of KT, is best known for streamlining organizational structure and boosting efficiency in his previous stint as LG CNS CEO, and the industry is watching how Kim will use his prowess at the telecom company.

Kim Young-shub, a former LG CNS CEO, middle, poses with Google Cloud executives after signing a memorandum of understanding on digital transformation at Google’s headquarters in California on Nov. 8, 2022. [LG CNS]

Kim Young-shub, a nominee for CEO of KT, is best known for streamlining organizational structure and boosting efficiency in his previous stint as LG CNS CEO, and the industry is watching how Kim will use his prowess at the telecom company.

“The most important mission for the next KT CEO would be how they can restore governance to realize KT’s vision and come up with a blueprint to revamp the company structure amidst the leadership vacancy,” said Professor Cho Myung-hyun of Korea University’s department of business administration, who was active in the task force team to come up with a new governance structure in April. The team was comprised of corporate governance experts recommended by major domestic and foreign shareholders.

“What remains to be seen is how much the employees and shareholders positively respond to the new vision set forth by a CEO who comes from outside of the company.”

Since its establishment in 1981, there have only been two CEO appointments from outside of the company, so if successful Kim would become just the third.

The top post will last for two years and seven months until March 2026 if Kim is able to win the approval of 60 percent of the outstanding voting rights from the company's shareholders at the extraordinary general meeting at the end of August.

Kim joined Lucky Goldstar, the predecessor of LG’s subsidiary LX International in 1984 after graduating from Korea University with a bachelor’s degree in business administration. His prior roles include heading IT service provider LG CNS’s high-tech and solution business divisions from 2008 and then taking on the role of chief financial officer of LG Uplus in 2014. A year later, Kim was appointed as LG CNS’s CEO and retired in 2022.

During his tenure at LG CNS, Kim worked to strengthen the company’s profitability by restructuring poorly performing businesses and spurring the company’s new growth engines in artificial intelligence and cloud services.

“While Kim led LG CNS, he successfully slimmed down the management structure and reshuffled employees as the government imposed stricter regulations against conglomerates overdosing certain units or subsidiaries with more work than other departments,” said an anonymous source who worked in LG CNS during Kim’s tenure. “Kim’s management tactics will help KT stabilize and efficiently run the company.”

Right after his appointment as the new leader of LG CNS, what Kim emphasized most to his employees was efficiency over formality.

He emphasized employees having succinct methods of reporting, such as asking them to "report most pressing and important matters — but meticulously without leaving out the details" or "report the three most crucial matters even if you have 100 agendas on the list."

Kim also implemented a new evaluation system in 2019, which was considered to be radical during the time, to give more bonuses or compensations to outstanding employees regardless of their age or position. He also removed promotion tenure — a system in which employees need to work for at least five years at the company to advance forward from their positions — despite protests, saying that the company “won’t be able to survive unless transitioning to a technology-based corporation.” After removing tenure, Kim hosted over 30 in-house hearings to receive feedback.

If Kim does take over the top post, he has some hefty missions ahead to revamp the company after months of an unprecedented leadership vacuum. KT's attempts to appoint a new CEO fell apart multiple times as the Yoon Suk Yeol administration pointed to KT's lack of transparency and independence in its nomination process.

Former KT CEO Ku Hyeon-mo stepped down from the top post in March and the seat has remained vacant until now. Park Jong-wook, KT president and head of its business planning division, has served as the acting CEO.

It is highly likely that Kim would start by going through a company reshuffle as all of the personnel appointments at the headquarters and its 52 subsidiaries were pushed back until a new CEO is appointed.

Kim also needs a breakthrough to recover its share prices. KT shares which were around 35,000 won ($26.80) dropped to nearer 28,000 won in March after Ku left the top post. KT shares closed at 32,000 won on Monday, up 4.27 percent from Friday.

Minority shareholders of KT are in discussions to send a public letter to Kim regarding strategies to enhance KT’s core competencies, expanding new growth engines as well as improvements to better reflect their voices regarding the company’s major decision-making processes.

When KT has appointed an outsider as its leader, a massive reshuffle has always followed. When former CEOs Lee Suk-chae and Hwang Chang-gyu were appointed in 2009 and 2014 respectively, some 6,000 and 8,000 employees voluntarily resigned from their posts.

“There are many entities with different interests within the organization and strategies of departments and businesses within each subsidiary differ accordingly, so there needs to be definite causes and controls if Kim wants to revamp the business structure,” said a source within the telecom industry.

As of last year, KT has 20,544 employees, much bigger than other major telecom carriers such as SK Telecom with 5,314 and LG Uplus with 10,494 employees.

Meanwhile, KT’s quarterly earnings for the April-June period showed surprising growth even amidst the leadership vacancy. Its quarterly operating profit jumped 25.5 percent to 576.1 billion won, above the market estimate of 520.4 billion won compiled by FnGuide.

The telecom carrier stated both of its business-to-consumer (B2C) business and business-to-business (B2B) businesses in telecom and non-telecom units showed balanced growth.

Sales rose 3.7 percent to 6.55 trillion won, slightly above the market consensus of 6.53 trillion won.

For the B2C telecom business, sales inched upwards 0.8 percent to 2.39 trillion won due to an increase in the number of premium mobile and broadband subscribers and growth in roaming service.

5G users took up 68 percent of KT’s total handset service subscribers, which was more than the previous quarter’s 65 percent.

Sales from the telecom business in enterprises grew 7.6 percent to 546.9 billion won due to an increase in CCTV lines and more orders from small- and mid-sized content providers. Corporate internet and data-related service sales stood at 352 billion won, up 5.2 percent.

The B2C non-telecom unit, which includes media-related businesses, saw a 3.8 percent increase to 575.6 billion won.

Sales from the non-telecom business for enterprises, which includes enterprise IT services, rose 0.6 percent on year to 505.9 billion won. Although accommodation and hospitality take up the smallest proportion of the generated sales at 10 percent, it showed the highest growth at 50.7 billion won, a 13.4 percent increase on year.

Net profit rose 19 percent to 432.5 billion won, exceeding analysts’ expectations of 373.1 billion won.

BY YU SUNG-KUK, LEE JAE-LIM [lee.jaelim@joongang.co.kr]