TONG YANG SECURITIES
Korea Exchange: 003470 Meeting Date: 3/14/2014
Tong Yang Group, one of several troubled chaebols, has been in a predicament with various alleged issues surrounding the group chairman HYUN Jae Hyun and some executives of the group companies. Court cases have focused on stock price manipulation, the issuance of fraudulent corporate bonds and commercial paper, financial fraud by illegal lending, and class actions against the chairman and Tong Yang Securities. In addition, some of the group companies have been underway of the court rehabilitation. Although no final decisions have yet been announced by the court, shareholders should pay close attention to these serious charges since they may negatively affect long-term shareholder value and certainly raises questions about transparency as well as the accountability of the board.
Unfortunately, Korean regulations do not require a company to remove a convicted director from a board. Thus, not surprisingly, it has been common for companies to keep convicted directors on their boards, generally claiming that their leadership is essential for company growth and further success. However, due to growing criticism and pressure from the public (as well as the inability of convicted directors to perform the duties of a board member during a jail term), recently convicted chairmen of chaebols, such as CHEY Tae Won of SK Group, KIM Seung Youn of Hanwha Group, and LEE Jae Hyun at CJ Group, have resigned from their post in their respective groups, holding themselves responsible for their wrongdoings. Given the circumstances, shareholders should be closely monitoring the court cases involving HYUN Jae Hyun and Tong Yang Securities, and any verdicts ultimately made by the courts.
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