Published : Jan. 25, 2017 - 17:51
Amid growing uncertainty over the global competitiveness of the Korean steel industry and an intensifying probe into an influence-peddling scandal, Posco Chairman Kwon Oh-joon was given another three-year term as the head of the world’s fourth-largest steelmaker Wednesday.
The board of directors was briefed on an independent panel’s assessment on Kwon that he is qualified to seek a second term, and agreed to recommend him as the sole candidate for Posco’s next chairman during a shareholders’ meeting to be held in March. If the bill passes, he starts his second term officially. His term would end in March 2020.
Kwon taking the consecutive term was widely predicted, as he was the only candidate who pursued the top position and also because he has brought the reeling steelmaker back on track.
After reaching its peak in 2008, Posco has been on a downward path, facing constant threats from Chinese steelmakers growing bigger in size and production, which has contributed to a glut in the steel market.
Chinese rivals, propped up by the support of their government, have become more competitive in terms of product quality, a market insider said. When comparing the technological competitiveness of high-strength steel products used for cars, for instance, Chinese steelmakers have achieved 80-90 percent of Posco’s level, he added.
Seeking a breakthrough, the engineer-turned-CEO has carried out a massive restructuring, pursued new engine growth and tried to cut the cost at the same time. And it has turned out to be quite successful.
Posco on Wednesday said it posted 24.3 trillion won ($20.8 billion) in sales last year with an operating profit of 2.63 trillion. The size of the annual sales dropped 8.8 percent mainly due to the steelmaker’s restructuring efforts that shut down unprofitable businesses. But the operating profit last year grew 18 percent from the previous year thanks to significant improvements in global sales, the company said. It was the first time in 11 years for the steel giant to post a two-digit percentage growth in profit, it added. In 2008, the steel giant posted a record-breaking operating profit of 7.1 trillion won, a 51.8 percent increase from the previous year.
Despite improvements on financial sheets, the Posco chief has been facing looming questions over his alleged connection to the politics.
Speculations have been building that Kwon had support from Cheong Wa Dae, and in return gave business favors to associates of Choi Soon-sil, a longtime friend of President Park Geun-hye who has been at the center of the influence-peddling scandal.
A team of special prosecutors have reportedly secured evidence that either Choi or a former presidential aide interfered in the process of selecting Kwon as the company’s CEO in 2014.
It has been alleged that Kwon aided Choi’s manipulation of state and corporate affairs by appointing individuals with connections to Choi in Poreka, an ad agency formerly affiliated to the steelmaker.
Insiders say that Kwon becoming Posco chief three years ago was seen as “a rare choice,” considering his background as an engineer at an in-house research institute with no management history. There has been market rumors circulating that Posco, former state-run steelmaker, has been closely attached to politics, particularly to the presidential office.
Kwon seeking the second-term, despite suspicions being raised around him, appears to be possible due to a leadership vacuum in the public office and politicians preoccupied in dealing with the Choi scandal, and a presidential election in the coming months. The majority of Posco chairmen have served more than one term since the 1990s.
“It seems there’s no political leader who might interrupt the process of picking Posco’s new CEO. In this sense, Kwon is untouchable for now,” said a former Posco executive.
Rather than questioning Kwon’s CEO quality, Posco should cut ties with the administrations and secure transparency as well as independency in business operations, he added, noting that the company workers have been yearning for a strong leadership exercised by an owner like other chaebol families.
In a New Year’s speech, Kwon urged the workers to complete the goal of making “Posco the Great” by cultivating the drive for future growth and continue restructuring to improve work efficiency, with no mention of cutting ties with the politics.
By Cho Chung-un (christory@heraldcorp.com)