Flashlight Capital Partners, which owns 0.5% in KT&G, wants c.e.o compensation to be linked to stock performance. Photo credit: KT&G
Activist fund Flashlight Capital Partners (FCP) is proposing to change the compensation system for KT&G’s c.e.o.
FCP, which holds a 0.5% stake in KT&G, criticized the current c.e.o. compensation program, arguing that the annual salary is not tied to the company's stock prices.
“In the recent past, KT&G’s former c.e.o. was awarded a significant amount of compensation despite a 21% drop in KT&G’s stock price, while the KOSPI index surged by 27%," remarked Sanghyun Lee, FCP managing partner. "In March 2024, we urged the KT&G board to link the c.e.o compensation to stock performance, but no action has been taken so far," Lee added.
In its proposal to KT&G, the Singapore-based private equity fund recommended that c.e.o. Bang Kyung-man receive a basic annual salary of KRW100 million (US$72,000), along with performance-based stock grants. Under the "stock grant" system, no incentives or extra pay are allowed for the c.e.o. The stocks, if awarded, will be given to him in March 2027 at the end of his three-year term. Furthermore, the disposal of these granted stocks will be restricted for three years, the statement added.
If KT&G stock prices double from KRW93,700 during Bang's three-year term, he would receive 53,000 shares worth KRW10 billion at retirement, an FCP spokesperson told Korea JoonAng Daily.
FCP demanded that KT&G's board respond to the proposals by the end of this month.
KT&G expressed regret over FCP’s proposal, stating that the company is doing its best to maximize corporate and shareholder value.
"The company already adopted the stock grant system in May 2021 to maximize shareholders' value, and the c.e.o will receive 60% of his performance-based pay in stocks starting this year," KT&G said in a statement.
Analysts suggest that the main purpose of FCP's attempts appears to be boosting KT&G's stocks to recover investment gains.