Glass Lewis votes for Tcha Partners' proposal to change Namyang auditor

Global proxy advisory giant Glass, Lewis & Co. has voted for three out of the four proposals made by Seoul-based Tcha Partners Asset Management Co. to Namyang Dairy Products Co., supporting the activist fund’s move to improve the corporate governance of the South Korean dairy maker.     

In its proxy paper issued last week, Glass Lewis recommended Namyang shareholders approve these of Tcha Partners' requests: the election of alternate corporate auditor Sim Hye-seop; a dividend increase; and a share split. The advisory firm voted against one proposal, Namyang’s treasury share buyback.     

The suggestion on the alternate auditor for Namyang has been also supported by Institutional Shareholder Services Inc. (ISS), one of the top two global proxy advisory firms alongside Glass Lewis.

With the two firms’ recommendations, the chances of approving the new auditor at the March 31 general shareholders meeting have increased.

Glass Lewis stated that it supports the nomination of new auditor candidate Sim, citing his legal and corporate governance background and absence of apparent conflicts of interest.

On the other hand, the advisory firm voted against Namyang’s proposal to extend the terms of current inside director Hong Jin-seok, Chairman Hong Won-sik’s son, and auditor Sim Ho-keun. The current board member and auditor are accountable for failing to take corrective measures on the conviction of a current board member, the chairman, it noted.

Once Korea's top dairy producer, Namyang has faced a series of corporate-level crises over the past decade.

In 2013, it was revealed that the company’s salespeople were forcing distributors to buy more of their products. In 2021, the dairy maker faced blowback for its claim that its yogurt drink Bulgaris can protect against COVID-19. 

Last September, Chairman Hong and his family abruptly terminated a deal to sell the company's controlling stake to local private equity firm Hahn & Co., causing the investment firm to file a legal suit.
Meanwhile, the proxy advisory firm voted against Tcha Partners’ request for the buyback of treasury shares at 820,000 won ($630.8) apiece, around 44% higher than its closing price on March 28. The firm said it questions the applicability of the repurchase price as Hahn & Co.’s takeover bid remains in a legal dispute, which is expected to be appealed in the Supreme Court. 

Tcha Partners Director Kim Hyung-kyoon said the activist fund welcomed the decision of Glass Lewis, including the appointment of an alternate auditor.

“We will strive to implement our proposed share buyback to compensate for the absence of the mandatory takeover bid in Korea,” Kim said.

Write to Ji-Eun Ha at hazzys@hankyung.com

Jihyun Kim edited this article.