Another Dispute on SK’s Management Rights?

Foreign asset management company Sovereign, which lost in the fight for the management rights of SK Corporation at the general shareholders’ meeting in March this year, is once again calling for the dismissal of SK Chairman Chey Tae-won.

The request is expected to reignite the dispute between SK and Sovereign surrounding the management rights of SK.

Crest Securities, a subsidiary of Sovereign Asset Management, officially requested SK on October 25 to convene an extraordinary shareholders’ meeting and said, “We want two new articles to be added regarding the qualifications of directors in order to strengthen standards of corporate governance.”

It added, “SK Telecom has already been implementing a policy that bans those convicted as guilty from serving as directors. Our proposal aims at enhancing transparency of corporate governance at SK.”

The company also called for a revision to SK’s Articles of Association to add the following: a) to suspend directors from their positions until rulings come out if they are prosecuted on charge of criminal action for which they can be sentenced to imprisonment or a heavier penalty, and b) to remove them from the director position if they are sentenced to imprisonment or a heavier penalty.

Sovereign’s request is being interpreted as an effort to pull down Chairman Chey, who is waiting for the ruling of the court of second instance on charge of accounting fraud at SK Networks, from his office.

SK responded by saying, “Sovereign’s request has been dismissed already at the general shareholders’ meeting in March” and added, “At the meeting of Board of Directors scheduled to be held in China on October 28, we will consider the opinions of all shareholders and legal procedures and decide on whether to hold an extraordinary shareholders’ meeting.”

“SK has made endeavors to enhance the transparency of corporate governance from earlier this year and our performance has gotten better. Sovereign’s request is, therefore, unreasonable,” rebutted the company.

If SK’s Board of Directors refuses to convene an extraordinary shareholders’ meeting, Sovereign can apply for approval of the court to hold the meeting. Once the meeting is held, the two sides must fight for votes on the revision of the Articles of Association.

The total number of shares owned by the attendees must be one-third or more of outstanding shares issued and two-thirds or more of those attending must vote for Sovereign for its request to be accepted.

The businesses are looking at the sudden request of Sovereign as a “pre-war,” preparing for a fight for votes against Chairman Chey who will need to be reappointed at the general shareholders’ meeting when his term as a director expires at the end of March 2005.

Tae-Han Kim Byong-Ki Lee freewill@donga.com eye@donga.com