SK Group’s convicted chief returns

The convicted former chief of SK Group has returned to the board of the group’s holding company as chairman and chief executive, in a move highlighting poor corporate governance at South Korea’s family-run conglomerates.

Chey Tae-won was appointed as the registered director of SK Holdings in the company’s annual general meeting on Friday, although the National Pension Service, which is the second-largest shareholder with an 8.57 per cent stake, opposed the move, citing Mr Chey’s criminal record.

The tycoon is the largest shareholder of SK Holdings, the holding company of the country’s third-biggest conglomerate, with a 23.4 per cent stake. He was pardoned by South Korea’s president in August after serving half of his four-year prison term for embezzling more than $40m from SK Group companies.

The NPS had opposed his reappointment, saying that he has a history of undermining corporate value and shareholder interests. Last week, the Institutional Shareholders Services advised foreign shareholders, who own 23 per cent of SK Holdings, to oppose his return.

But no one voiced any opposition to his return at the AGM, which lasted 20 minutes. The move was approved by the majority of shareholders participating in the AGM. Mr Chey did not show up at the AGM but chaired a subsequent board meeting, where he was appointed board chairman and chief executive of SK Holdings.

“Chairman Chey has various business experiences, knowledge and global network. In the current business environment with growing uncertainties, we need his management ability and leadership for the company’s stable growth,” said Cho Dae-shik, president of SK Holdings.

The company said Mr Chey’s return as a board member would strengthen the controlling family’s accountability. In a gesture to please shareholders, SK Holdings last month set up a governance committee composed of four outside directors to oversee top managers on key business decisions.

Industry watchers said Mr Chey’s appointment would make little difference because he had already been deeply involved in management of SK Group companies. Even after he was imprisoned for using company funds for personal investments, Mr Chey appeared to have maintained a firm grip on power at SK, receiving more than 1,700 visits from company lawyers and officials.

He was paid Won30bn by group companies in 2013, which made him the country’s best-paid chief executive. He resigned from his executive posts following the resulting controversy.

But critics said his official return highlighted that Korean chaebol have a long way to go in terms of improving corporate governance, as Mr Chey’s crimes were seen as a blatant case of stealing shareholder money.

“It is just a symbolic change on paper. Even before the AGM, he had already been the group’s emperor making every important decision,” said Chung Sun-seop, editor of Chaebul.com, a website that analyses South Korea’s chaebol business groups. “There is no way to guard against top managers’ wrongdoing when ownership and management are not separated.”