KT&G Investors, Disappointed With Current CEO, Urge a More Transparent CEO Selection Process

Flashlight Capital Partners (FCP) is urging KT&G to select its next CEO in a more transparent manner.

In a video released ahead of KT&G’s March 2024 annual general meeting in South Korea, FCP highlighted what it saw as problems in the previous CEO nomination process. For example, it expressed regret that current CEO Baek Bok-in was the sole candidate, and criticized the unusually fast pace at which the board made its decision in just 11 days.

FCP also voiced disappointment with Baek’s performance, as he has served three consecutive terms in the role. According to FCP, over the past nine years KT&G’s share price fell 19%, while the KOSPI rose 26%.

The investor questioned management’s “futile pursuit of volume” at the expense of profit, noting that revenue rose 40% while operating profit fell 17%. FCP said this “lack of profit motivation” is a major reason the stock trades more than 50% below its peers.

To address these shortcomings, Flashlight Capital managing partner Lee Sang-hyun proposed allowing sufficient time for a proper candidate evaluation process; considering outside candidates with fast-moving consumer goods expertise; and thoroughly documenting the process to ensure transparency.

“In South Korea, completing a CEO nomination within 11 days is unprecedented and stands out even among other former state-owned companies,” Lee said in a statement.

In 2022, KT&G rejected FCP’s requests to spin off its profitable ginseng business and appoint certain outside directors.