“Was decision-making happening outside the board?...” Truston to scrutinize Taekwang Industrial board minutes [fn Market Watch]

[Financial News]  Taekwang Industrial’s key management decision-making processes are now under shareholder scrutiny. This follows Truston Asset Management’s request to inspect the board minutes to establish how decisions were made on the appointment of the CEO, large-scale investments and transactions involving the owner family. The move is intended to go beyond a simple request for disclosure of management information and determine whether the board functioned as a genuine decision-making body.
According to the financial investment industry on the 13th, Truston Asset Management, which jointly holds a 5.04% stake in Taekwang Industrial, that day requested to inspect and copy the minutes of the company’s board and its committees. It also urged the audit committee to investigate the related matters and asked it to respond within 30 days on whether it would launch an audit, the scope of any audit and other details.
The move follows an open letter sent on September 3 regarding the operation of the Management Council. Truston said it had submitted 10 questions and requested five measures at the time, but Taekwang Industrial had not responded by the reply deadline, the 3rd of this month.
The central issue is who actually made key management decisions. According to Truston, three CEO appointments between December 2023 and March of last year were announced in the name of the Taekwang Group before board resolutions were passed. In July of last year, a 1.5 trillion won investment plan for new businesses was also made public through the group’s public relations office before it was disclosed in a regulatory filing.
The fundraising process is also under scrutiny. Taekwang Industrial pursued the issuance of exchangeable bonds worth 318.6 billion won but withdrew the plan about five months later. Over disclosure-related issues, including the new-business investment plan, it was designated an unfaithful disclosure company twice and assessed penalties totaling 126 million won.
The possibility of conflicts of interest between the owner family and counterparties to transactions has also come under scrutiny. Truston takes issue with the fact that the two children of former chairman Lee Ho-jin each invested 9% in T2 Private Equity, a co-investor in the acquisition of Aekyung Industrial, and in Heungkuk REITs Management, the manager of a REIT in which Taekwang Industrial invested. The key question is whether the board sufficiently reviewed potential conflicts of interest in these transactions.
Payments to former chairman Lee for management advisory services are also being examined. Truston claims that although the management advisory contract, capped at 900 million won a year, expired last October, no board agenda item approving its renewal since then can be found in public disclosures.
The audit committee’s response is another factor. Truston said it had received no response to three audit requests since 2023 and has now made specific demands, including whether an audit will be launched and how its findings will be reported.
Meanwhile, the investment banking industry viewed the matter not as a simple disclosure dispute between an activist fund and a company, but as a corporate governance issue concerning the independence of board decision-making and the effectiveness of internal controls. One industry source said, “Depending on the findings from the review of the minutes, the controversy over management’s decision-making procedures could also widen.”
However, the alleged conflicts of interest and procedural issues raised so far are claims by Truston; neither actual illegality nor an infringement of the board’s authority has been established. Taekwang Industrial’s detailed response and the findings from the review of the minutes are expected to be key issues going forward.


[email protected] Kim Kyung-ah Reporter