NPS chief questions fairness in POSCO’s CEO selection process

POSCO Holdings Inc., the parent of South Korea’s largest steelmaker POSCO, has come under fire for its opaqueness in choosing a new leader as its largest shareholder suspects that the current selection process is skewed in favor of the incumbent Chairman Choi Jeong-woo.

Kim Tae-hyun, chairman and chief executive of the state-run National Pension Service (NPS), on Thursday called for a new process that ensures transparency and fairness in the selection of POSCO’s next CEO.

“It is questionable whether the selection process for POSCO’s new leader is being conducted fairly and transparently. Anyone inside and outside of POSCO must compete on an equal footing,” he told The Korea Economic Daily in a telephone interview.

Having the right person for the job is also in the interest of POSCO’s shareholders, he said.

The NPS is the largest shareholder of POSCO Holdings with a 6.71% stake.

BIASED CEO CANDIDATE RECOMMENDATION PANEL?

Kim’s call for enhanced transparency and fairness comes a week after POSCO said it would abolish its preferential screening system for the reappointment of the incumbent chairman.

The NPS chief, however, said the steelmaker must take stronger action, taking issue with POSCO’s CEO candidate recommendation committee.

Six of the seven members of the CEO candidate recommendation panel were appointed by the incumbent Chairman Choi, the NPS chief said, indicating that they would likely back Choi again for the chairmanship.

On Friday POSCO issued a statement refuting the NPS chief’s claims of an opaque CEO selection process.

“The committee will proceed with the screening process independently, transparently and fairly in line with the standards set in the new governance-related regulations announced last week and in the interest of our shareholders,” it said. “If the current chairman applies for a third consecutive term, it’s his choice. He is free to do so.”

The recommendation committee plans to draw up a list of CEO candidates by Jan. 18 and announce shortlisted candidates in February.

Industry officials said the process may take longer now that POSCO’s largest shareholder is questioning the fairness of the new CEO selection process.

Since taking office in September 2022, NPS Chairman Kim has been calling for improved corporate governance at companies in which the state pension fund has invested.

Seo Won-joo, the pension fund’s chief investment officer, also said last year that the fund would strengthen its shareholder engagement, calling for enhanced transparency and fairness in CEO hiring processes at companies such as KT Corp. and POSCO Holdings, where there are no clear dominant shareholders.

URGED TO FOLLOW KT'S EXAMPLE

NPS Chairman Kim has proposed the CEO selection process at KT, one of Korea’s leading telecommunications companies, as an example for POSCO to follow.

In August, KT picked Kim Young-shub, former CEO of information technology service provider LG CNS Co., to lead the telecom company.

His appointment came after months of a leadership vacuum at KT, created by increased shareholder activism and political meddling.

KT’s top leadership post had been vacant since former CEO Ku Hyeon-mo stepped down in March after failing to win shareholder approval for his second term.

His thwarted bid followed weeks of strong requests by KT’s largest shareholder, the NPS, and Korean President Yoon Suk Yeol for the telecom company to fix its opaque process in choosing the next CEO.

Yoon and lawmakers of the ruling People Power Party criticized KT board of directors’ choice, suggesting a second term for Ku could be likened to being “self-appointed.”

In March, KT’s board nominated Yoon Kyoung-lim, a telecom industry veteran and KT’s digital transformation division chief, as another candidate. But he resigned as the CEO nominee in the face of objections from the NPS and KT’s second-largest shareholder Hyundai Motor Group.

Write to Byeong-hwa Ryu and Jae-Fu Kim at hwahwa@hankyung.com

In-Soo Nam edited this article.