|Hyundai Motor headquarters in Yangjae-dong, Seoul / Yonhap|
By Nam Hyun-woo
The Korea Corporate Governance Service (KCGS), the country's leading proxy advisor, has decided to side with Hyundai Motor over the company's proposed dividend policy and the appointment of independent board members, it said Wednesday.
The KCGS is the latest in a growing chorus of investor advisers here and abroad, which have recommended Hyundai Motor shareholders to vote for the company's plan of paying 3,000 per common share, and oppose U.S. hedge fund Elliott's demand for the company to pay 21,967 won per share during the automaker's March 22 shareholders' meeting.
Four other advisors ― Institutional Shareholder Services, Glass Lewis, Sustinvest, and the Daishin Economic Research Institute ― are also backing Hyundai.
In its report, KCGS urged shareholders to "not use their rights" on Elliott's demand, saying the "dividend is appropriate when it is paid at a stable pace on the basis of long term policies, and Hyundai Motor's proposal is in accordance with this."
Elliott's demand would force Hyundai Motor and its affiliate Hyundai Mobis to return 7 trillion won ($6.2 billion) to shareholders through special dividends, which is more than 4 times Hyundai Motor's net profit of 1.65 trillion won. Elliott has also demanded Hyundai Mobis to pay 26,399 won per common share.
Proxy advisors cited this as the grounds for their opposing opinion on Elliott's demand. Both Sustinvest and Daishin Economic Research Institute said the dividend Elliott demanded was "excessive" and would likely "undermine the company's mid- and long-term value." Institutional Shareholder Services and Glass Lewis also cited similar reasons for their siding with Hyundai.
"Major proxy advisors in and outside of Korea have all supported Hyundai Motor's proposed dividend policy," a Hyundai Motor Group official said. "It seems they have highly evaluated the virtuous cycle of the company's sustainability improving shareholders' value."
Over naming three independent board members, the advisors showed mixed response, with Institutional Shareholder Services alone recommending two Elliott candidates.