POSCO chair, board under investigation ahead of new CEO selection

Police in Seoul have launched a probe into South Korea’s POSCO Holdings Inc. Chairman and Chief Executive Choi Jeong-woo and the company's board members over alleged embezzlement and anti-graft law violations. 

Industry insiders say the company may review its next CEO selection process, which has been challenged by its largest shareholder National Pension Service (NPS) from the start. 

Choi and 15 officials of POSCO Holdings, the holding firm of Korea’s No. 1 steelmaker POSCO Group, are under investigation for alleged embezzlement, police said on Friday. Some outside directors of the board are also facing charges of violating the Improper Solicitation and Graft Act, the country’s anti-graft law.

The holding firm is accused of unauthorized expenses surrounding its board meeting abroad. The board held a meeting in Canada last August for which it spent 680 million won ($517,504) on chartered flights, meals, accommodations, golf and other activities. 

Although POSCO Holdings was meant to pay for all the expenses, the holding firm, subsidiary POSCO and its Canadian unit shared the expenditures, sources said.

ACCUSED CANDIDATES

The accused officials include Choi and several internal candidates for the next CEO post – POSCO Vice Chairman Kim Hag-dong, POSCO Holdings President Jeong Ki-seop, as well as Vice President Kim Ji-yong and Vice President Yoo Byeong-og, according to sources.

Internal candidates supported by Choi or under investigation are regarded as disqualified for the position, a POSCO official said. Through the probe the government is giving a clear direction for the next chair role, the official added.

On Dec. 28 of last year, state-run NPS called for a new process to select the company’s new chief. There were concerns over whether the process was being conducted fairly and transparently, NPS Chair Kim Tae-hyun told The Korea Economic Daily at the time.

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

On the following day, POSCO Holdings issued a statement refuting the NPS chief’s claims of an opaque CEO selection process.

Choi took the helm at POSCO Holdings in July 2018 under former President Moon Jae-in’s liberal government. He never officially announced his bid to run again, but industry insiders had speculated he might pursue a third consecutive term.

Earlier this month, the company said that Choi is not among its next chair candidates. 

KT'S EXAMPLE

POSCO Holdings’ next CEO selection process might follow telecom leader KT Corp.’s example, sources say.

Seo Won-joo, NPS’ 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 and POSCO Holdings, where there are no clear dominant shareholders.

Last March, KT’s former CEO Ku Hyeon-mo stepped down 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.

KT newly formed a committee for chair candidate recommendations at the time following the resignation of the firm’s outside directors.

POSCO Holdings' chair candidate recommendation committee members are also highly likely to resign and a new chair appointment team will be created, a senior official at the firm said.

Write to Woo-Sub Kim and Sang Hoon Sung at duter@hankyung.com

Jihyun Kim edited this article.