KT&G shareholders sided with management and chose the company’s growth over larger dividends. Photo credit: Kwangmo, Creative Commons
Korea Tobacco & Ginseng Corporation (KT&G) management successfully resisted activist fund investors' demands at its annual shareholders' meeting as all the activist funds' proposals were rejected by the company's shareholders with the exception of their agenda item calling for quarterly dividends.
According to The Korea Times, the leadership of current c.e.o. Baek Bok-in is anticipated to be strengthened because all of the suggestions for board members made by the activist fund investors Flashlight Capital Partners (FCP) and Anda Asset Management (AAM) were also rejected.
The board's proposed dividend payout of KRW5,000 (US$3.85) per share received 68.1% of the vote from shareholders, approving management's initial strategy. Shareholders voted 32.2% in favor of FCP’s proposal for a KRW10,000 dividend per share, while only 1.5% supported AAM’s KRW7,867 plan.
The two activist funds' argument that the biggest cigarette firm in Korea should raise its dividend payments to a level comparable to that of its global competitors was unsuccessful in getting enough shareholder proxy votes.
The activist funds' other demands, which included stock retirement and repurchases totaling KRW1.2 trillion and an increase in the number of independent directors from six to eight, were also rejected.
FCP's suggestion to start quarterly payouts was the lone exception, with 82.2% of shareholders voting in favor for it.
The activist funds were convinced they would prevail at the shareholders meeting given that 63% of KT&G shareholders are either retail investors or overseas investors. But it turned out that shareholders valued the company's steady growth more than larger dividend payments.
The conclusion of the shareholders meeting was also influenced by the National Pension Service's (NPS) decision to support the current management. NPS is the company's largest stakeholder.
Baek Bok-in, KT&G c.e.o., said, “The firm respects the shareholders' decision to trust and support our long-term growth strategy for future investment. The company aims to grow into a global top-tier firm through long-term growth investment, technological innovation and aggressive expansion into overseas markets.”