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[Editorial] Another national disgrace

Probe begins into alleged malpractice at highest ranks of Posco Holdings

Jan. 15, 2024 - 05:30 By Korea Herald

Police are investigating 12 board members and four executives of Posco Holdings on charges of occupational breach of trust over allegations that they had subsidiaries partially pay for a lavish five-night-seven-day trip to Canada in August last year.

Some of them, including outside directors who are professors, are also suspected of violating the law on improper solicitation and graft.

Citing a complaint filed with the prosecution last month by a Pohang-based civic group, the Chosun Ilbo newspaper reported that the 16 people under investigation, including Posco Holdings chief executive and chairman Choi Jeong-woo held a board meeting in Vancouver for a day, played two rounds of golf, spent 100 million won on dining alone and 170 million won to fly on a chartered plane and a chartered helicopter from Vancouver to tourist destinations in western Canada.

The complaint alleged that the entire trip cost some 680 million won ($517,000), about 350 million won of which was paid by Posco Holdings and the rest by subsidiaries Posco-Canada (310 million won) and Posco (20 million won). Company rules stipulate that Posco Holdings must cover the full cost of board meetings.

The Seoul Central District Prosecutors Office handed over the case to the Seoul Suseo Police Station last month.

According to Chosun Ilbo, the group stayed in a high-end hotel that cost 1.75 million won per night; spent 25 million won for a meal at a seafood restaurant; 22 million won at a Chinese restaurant; and 27 million won on wine.

The civic group, which has called on the holding company to relocate to the steelmaker’s home of Pohang, also alleged in the complaint that the chairman lobbied seven outside directors who are on a committee that elects the CEO to reelect Choi to a third term.

Choi, who became CEO of the holding company and chairman of Posco Group in July 2018, and was reelected to serve a second term in March 2021, was eliminated from the list of CEO candidates in a meeting of the committee early this month. The committee did not explain at the time whether Choi himself did not wish to be on the list.

The seven outside directors were either appointed or re-appointed during Choi’s time as chairman.

The National Pension Service, which is the largest shareholder of Posco Holdings with a 6.71-percent stake, had publicly criticized the committee, saying it was unfairly organized.

Choi has been credited for Posco Group’s bold investments in secondary batteries that transformed the traditional steelmaker into a more future-oriented company and helped Posco’s share price more than triple from 2020 lows to July 2023.

But despite being the chief of the nation’s fifth-largest conglomerate by assets, Choi was never among the tycoons that accompanied President Yoon Suk Yeol on his many official overseas visits.

Unlike other major South Korean conglomerates known as chaebol, Posco is often locally referred to as an “ownerless” business group as it is not controlled by a founding family.

Established as Pohang Iron and Steel Company in 1968 by the Korean government with loans from Japan received as a result of a 1965 Seoul-Tokyo pact to establish diplomatic ties, Posco has been a special company to Koreans throughout its history.

Koreans say steel is “the rice (staple) of industries” as the steel products Posco churned out were used to build cars and ships, key export items that drove the country’s economic growth. With a market cap of some 38 trillion won, Posco is now one of the world’s biggest steelmakers. It was ranked as the world’s most competitive steelmaker for 14 straight years by the global steel industry information provider World Steel Dynamics.

Hence, authorities must rigorously investigate the alleged malpractice at the top echelon of the steelmaker to make sure this kind of opprobrium never occurs again.