By Don Southerton, Korea Legal.org Editor
Korea’s industrial groups and their family management are under constant public scrutiny. For decades they have attracted both praise and attack. Hyundai and Samsung tend to get most of the attention ( note my previous few posts). This surfaced today. In defense of the actions of Chairman Chung Mong Koo, considerable restructuring efforts were required across Korea following the 1997 IMF Crisis. Much of this was for survival.
Korea media notes:
Chung Mong-koo, chairman of Hyundai-Kia Automotive Group, and Kim Dong-jin, vice chairman of Hyundai Mobis, the carmaker’s parts manufacturer, were ordered to pay 70 billion won ($60 million) in damages and penalties to the automaker for “managerial misconduct.”
The ruling follows Chung’s conviction for breach of trust in June 2008 when he was given a three-year suspended jail term. The 71-year-old tycoon was later pardoned by President Lee Myung-bak.
The Seoul Central District Court ruled in favor of the Solidarity for Economic Reform (SER) and 14 minority shareholders, Monday, who filed a lawsuit against Chung and Kim for losses they inflicted on the company when they diverted funds from affiliates to beef up the eroded capital base of the now-defunct Hyundai Space and Aircraft after the 1997 currency crisis.
The amount is the biggest ever to have been awarded by a court in a damages suit initiated by minority shareholders against the CEO of a conglomerate.
“The court rejects claims by Chung and Kim that it was an inevitable managerial decision that overall inflicted no losses on the company,” presiding senior Judge Shin Hyun-chul said. “The court also does not accept their claim that the lawsuit was filed after a statute of limitations had expired.”
Shin concluded that Chung had ordered a capital increase for Hyundai Aerospace in order to defend his managerial control and tried to have his company cover his personal debt guarantees ― all actions that supported the plaintiffs’ argument.
A Hyundai representative said that Chung has not yet decided whether to appeal or pay the damages as ordered.
“Our legal team is checking the pros and cons before making a final decision,” he said, complaining that the amount was “too much.”
The plaintiffs lodged the lawsuit after Hyundai Motor rejected their request to its board of directors to take action against the chairman. SER cited the conviction of Chung for embezzling 70 billion won in corporate funds on top of a 45 billion won fine levied by the Fair Trade Commission for illegally subsidizing Hyundai Aerospace through affiliate Glovis, now Mobis. [ not sure this is correct, I believe it was Hyundai Precision, not Glovis--which was created in 2001.]
Under current regulation, this request must precede any legal action by minority shareholders to seek damages for losses a company sustains.
