KT&G triumphs over activist funds

Shareholders opt for firm’s future growth over higher dividends

Korea Tobacco & Ginseng Corporation (KT&G) management has succeeded in defending itself from activist fund investors’ demands at its annual shareholders’ meeting earlier this week. The tobacco company’s shareholders voted down all proposals suggested by activist funds, except their agenda item calling for quarterly dividends.

Instead, shareholders of KT&G approved all agenda points raised by the firm’s board at the annual shareholders meeting held in Daejeon on Tuesday. As activist fund investors’ suggestions for board members were also all voted down, the leadership of incumbent CEO Baek Bok-in is expected to be strengthened.

For the dividend payout, 68.1 percent of shareholders voted for the board’s suggested 5,000 won ($3.85) per share, confirming management’s original plan. Flashlight

Capital Partners’ (FCP’s) proposal of a dividend per share of 10,000 won earned 32.2 percent of shareholders’ votes, while Anda Asset Management’s proposal of 7,867 won earned only 1.5 percent of the votes. The contention of the two activists funds that Korea’s largest tobacco company should expand its dividend payouts to a level of global peers failed to attract enough proxy votes from shareholders.

The activist funds’ other proposals

— including stock repurchase and retirement worth 1.2 trillion won and an increase in the number of independent directors from six to eight — were also put to rest at the shareholders meeting.

The only exception was the issue of initiating quarterly dividends, suggested by the FCP. It was approved with 82.2 percent of shareholders affirming. However, as the board expressed agreement with the quarterly dividend payout, the item’s success cannot entirely be regarded as a victory for the activist fund.

Considering that 63 percent of shareholders are either foreign investors or retail investors, the activist funds were confident of winning them over at the shareholders’ meeting. But, shareholders turned out to prioritize the firm’s stable growth over higher dividend payouts. The decision by the National Pension Service (NPS), the largest shareholder of the firm, to buttress the incumbent management also contributed to the outcome of the shareholders meeting.

“The firm respects the shareholders’ decision to trust and support our long-term growth strategy for future investment,” CEO Baek Bok-in, who has led the firm for eight years, said. “The company aims to grow into a global top-tier firm through longterm growth investment, technological innovation and aggressive expansion into overseas markets.”

Some minor shareholders expressed regret over the results, saying much more could have been accomplished if the two activist funds’ agendas were united in the first place.