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Hyundai Motor gets key support

Proxy advisory firm sides with carmaker in battle with Elliott
Mar 11,2019
Hyundai Motor has received the support of proxy advisory firm Glass Lewis as it battles Elliott Management’s demand for a massive dividend.

New York-based Elliott, the world’s largest activist hedge fund, requested a one-time payout of 4.5 trillion won ($3.97 billion), or 21,967 won per share.

Ahead of Hyundai Motor’s shareholder meeting on March 22, Glass Lewis recommended voting for the company’s proposal of a dividend of 3,000 won per share.

In a report, the proxy advisory firm said it could not recommend a substantial single payout. It argued the automaker will need a significant amount of cash for research and development (R&D) and potential mergers and acquisitions in order to improve competitiveness and long-term profitability.

Hyundai has promised new investment, with 45 trillion won to develop future technologies over the next five years.

The Glass Lewis recommendation comes as Elliott, which owns a significant stake in Hyundai, urged the automaker’s shareholders in an open letter late last month to side with their proposal. In addition to pushing for the large dividend, it also submitted nominations for outside directors, arguing that the company has excess capital and that its board lacks independence.

In the letter, Elliott cited Hyundai Motor’s net cash balance of 14.3 trillion won and noted that other automakers have cash balances less than half that size. It concluded that the excess funds were being mismanaged.

In its report, Glass Lewis approved Hyundai’s recommendations for outside directors over Elliott’s picks.

The advisory firm said that the outside directors nominated by Hyundai have enough experience in investment analysis, capital management and corporate governance to help the company’s push to increase competitiveness.

While supporting the automaker in the most contentious of the proposals, the advisory firm was against the company’s recommendations of President Lee Won-hee and Head of R&D Albert Biermann as directors, citing the need for board independence.

It also rejected Hyundai’s request to approve its financial statement, saying there were no audited reports.

Hyundai Motor said that it had released its financials on March 7 and that the advisory firm’s report was created prior to the disclosure.

The battle between Hyundai and Elliott is just the latest, with Elliott scoring a victory last year.

While the Hyundai Motor Group proposed last year to change its complex cross shareholding structure to a simpler one — whereby affiliate Hyundai Mobis would act as the ultimate holding company — the plan failed to materialize as it faced opposition not only from Elliott. Numerous advisory firms, including Glass Lewis, also rejected the move.


BY CHAE YUN-HWAN [chae.yunhwan@joongang.co.kr]