KT&G’s No. 1 shareholder IBK vetoes naming Bang as CEO

South Korea’s KT&G Corp., the world’s leading tobacco maker, is facing challenges in its chief executive appointment as the firm’s largest shareholder, state-run Industrial Bank of Korea (IBK), has officially vetoed KT&G's final CEO candidate.

In its disclosure on Tuesday, IBK requested KT&G’s shareholders oppose the appointment of Bang Kyung-man, the tobacco maker’s chief operating officer, as the next CEO, adding that its veto proposal is in service of improving KT&G’s governance by strengthening the expertise and independence of the board.

Bang, who joined the tobacco maker in 1998 and led the global expansion of its major cigarette brands such as Esse, was named the final candidate late last month.

The bank also requested the tobacco maker’s stakeholders oppose the hiring of KT&G’s current board chair Lim Min-kyu, former CEO at SK Materials Co., as an outside director.

“During Bang’s term as COO, KT&G’s operating profit declined more than 20%. Furthermore, there have been issues of outside directors’ overseas trips, focused more on tourism than business,” an IBK official said.

“Without a sufficient explanation from Lim for the many allegations against him as the board chair, re-nominating him as a board director candidate is a power grab by outside directors and is contrary to the purpose of the government-led corporate value-up program,” added the official.

IBK requested shareholders to support the nomination of Son Dong-hwan, a law professor at Sungkyunkwan University, as an outside director. The bank recommended Son, while the board of KT&G recommended Bang and Lim.

IBK holds a 6.93% stake in KT&G as its top shareholder. Following its veto of Bang's appointment, market insiders are watching the moves of the National Pension Service (NPS), the second-largest stakeholder in KT&G with 6.31%.

KT&G will hold a meeting of general shareholders on March 28. In the meeting, the stakeholders can each vote on one director candidate, without distinguishing between inside and outside directors. The two who receive the most votes will be elected as directors.

Write to Eui-Jin Jeong and Hun-Hyoung Ha at justjin@hankyung.com

Jihyun Kim edited this article.