KT&G to introduce cumulative voting system

Korea Tobacco and Ginseng (KT&G) has removed from its articles of association a stipulation that excluded the cumulative voting system. It was the first time a local listed company has deleted such an article.

Noting that it decided to make the move at a directors` meeting, KT&G said it would announce the decision at the Korea Stock Exchange and introduce the system beginning at its general shareholders` meeting next year.

The cumulative voting system, which was introduced in Korea through a revision of the Commercial Law at the end of 1998, puts minority shareholders on more equal footing with their large shareholding counterparts by allowing them to select directorial candidates to represent their interests.

Current law allows companies to outlaw the cumulative voting system by including such a stipulation in their articles of association.

At present, 78% of listed companies forbid the use of the cumulative voting system and among public corporations, only Korea Gas Corp. has no such ban.

In a related development, the government lowered the minimum equity ratio needed for minority shareholders to demand the cumulative voting system from 3% to 1%. The change was made through a revision of the securities transaction law that is slated to go into effect in the middle of this month.

Lee Cheol-Yong lcy@donga.com