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New director sought for the Hyundai Mobis board

Jan 03,2020
Hyundai Mobis, the largest shareholder of Hyundai Motor, is planning to appoint an outside director to improve the transparency of its governance structure following challenges from an activist hedge fund.

The auto parts maker announced in a statement Thursday that it is inviting shareholders to recommend candidates for the new outside director position through Jan. 13.

The new outside director will be in charge of communicating with shareholders and representing their interests at board meetings. Hyundai Mobis said the move is aimed at creating a transparent environment and improve shareholder rights.

New York City’s Elliott Management, which owns 2.66 percent of Hyundai Mobis and 3 percent of Hyundai Motor, questioned dividend plans and board appointments at Hyundai Mobis and related companies in 2018.

The hedge fund is known for its attempt to block the controversial merger between Samsung C&T and Cheil Industries in 2015, a deal which strengthened family control over the Samsung Group.

Hyundai Motor Group’s original attempt to restructure itself hit a roadblock when Elliott, which owned a $1-billion stake in three of the group’s companies, demanded Hyundai Motor to become a holding company by merging with Hyundai Mobis.

The automaker group’s original restructuring plan was aimed at maintaining family control over Hyundai Motor Group and related companies.

The activist hedge fund demanded that shareholder returns be based on net income instead of free cash flow, in an apparent attempt to maximize dividends paid to shareholders.

The U.S. hedge fund had demanded a 26,399 won ($23) per share dividend from the auto parts manufacturer, totaling 2.5 trillion won, more than twice of 1.1 trillion won in dividends offered in early 2019.

Also in its list of demands, Elliott asked the group to appointment independent board members, saying that the board lacked diversity.

Elliott eventually lost its battle in March last year, but the group has been working to make peace with shareholders by announcing last year it will pay out dividends, buy back stocks and cancel shares valued at 2.6 trillion won over the next three years.

Hyundai Mobis appointed former Opel CEO Karl-Thomas Neumann and U.S. finance expert Brian D. Jones to its board as outside directors early last year, along with three Korean experts.

The company has also been working to gain market trust by holding more information sessions for investors and sharing future strategies with shareholders.

After building trust with shareholders, some market watchers anticipate that the automaking group could undertake more restructuring in board representation this year.

BY KO JUN-TAE [ko.juntae@joongang.co.kr]