[Edaily Reporter Kim Kyung-eun ] On the 21st, the Korea Corporate Governance Forum urged the board of directors of HyundaiMotor(005380) to change the method of acquiring shares in Boston Dynamics (BD). Given the controversy that arose over HyundaiMotor Group Chairman Chung Eui-sun’s past acquisition of a 20% stake in BD under his personal name—which was seen as providing an investment opportunity to an individual at the company’s expense—the forum argued that this is an opportunity to restructure the arrangement so that the company holds the remaining shares.

The Forum issued a commentary titled “Five Recommendations to the HyundaiMotor Board of Directors” that day, stating, “If Chairman Chung were to acquire a portion of the remaining BD shares, it could serve as a test case for the revised Commercial Act.”

The Forum argued that instead of HyundaiMotor and its affiliates acquiring the remaining 9.65% stake in BD in proportion to their existing ownership shares, HMG Global—a U.S.-based company controlled by HyundaiMotor—should acquire the entire stake.

The Forum pointed out, “When Chairman Chung personally acquired a 20% stake in BD about five years ago, legal experts questioned the legitimacy of the move,” adding, “Controversy continues over whether this violates the ‘prohibition on providing business opportunities’ under the Fair Trade Act and the ‘prohibition on directors misappropriating corporate opportunities’ under the Commercial Act.”

Under the Fair Trade Act, the prohibition on providing business opportunities is a system that prevents large conglomerates with total assets of 5 trillion won or more from funneling promising business opportunities—which would yield significant profits for the company—to related parties (such as the controlling shareholder’s family) or companies they control. This includes intentionally abandoning or transferring business opportunities that the company could pursue directly or through other affiliates.

In addition, the forum proposed five measures to enhance shareholder value, including the sale of stakes in KoreaZinc and KTCorporation, a reduction in investment in the Global Business Center (GBC), and the repurchase and cancellation of treasury shares, with a focus on preferred shares.

It proposed that the 5% stake in KoreaZinc held by HMG Global (approximately 1 trillion won) and the 5% stake in KTCorporation held by HyundaiMotor (approximately 700 billion won) be sold and used as funds for shareholder returns. The forum argued that HMG Global’s continued holding of the KoreaZinc stake is inconsistent with its founding purpose—which was to invest in future new businesses—and that the cross-shareholding structure with KTCorporation is also undesirable from a corporate governance perspective.

They also urged a reevaluation of the GBC development project. The GBC is a commercial building project scheduled for completion in 2031, with three group companies—HyundaiMotor, KIA CORPORATION, and HyundaiMobis—investing 2 trillion won in public contributions and 5 trillion won in construction costs.

In response, the forum pointed out that “even applying the 55% stake ratio at the time of the bid, HyundaiMotor’s total investment in the GBC amounts to 10% of its 132 trillion won in equity,” criticizing it as an excessive allocation of capital.

The forum further urged, “HyundaiMotor is an automotive and mobility company, not a commercial real estate REIT,” and called on the group to “sell (part of) or monetize the GBC stakes held by the three HyundaiMotor Group companies—even at this late stage—and invest the proceeds in future mobility.”

Regarding shareholder return policies, the forum called for a share buyback and cancellation program focused on preferred shares. It noted that although HyundaiMotor announced last year that it would buy back and cancel its own shares while taking the preferred share discount rate into account, the actual execution saw a much higher proportion of common shares purchased.

The forum argued, “Currently, HyundaiMotor’s Class 2 preferred stock is trading at approximately 47% of the price of common stock,” adding, “If preferred stock were purchased and canceled with the same amount of funds, the shareholder return effect could be more than double that of common stock.”

Regarding the composition of HyundaiMotor’s board of directors, the forum assessed it as superior compared to other major South Korean conglomerates. HyundaiMotor’s board consists of 12 members: five inside directors and seven outside directors. In particular, it recognized Kim Soo-yi—former Head of Asia-Pacific at the Canada Pension Plan Investment Board (CPPIB)—and Benjamin Tan—former portfolio manager at the Government of Singapore Investment Corporation (GIC)—both appointed in March of this year, as international financial experts.

However, the forum emphasized, “We do not recall the HyundaiMotor Board of Directors playing an impressive role in enhancing shareholder value over the past one to two years,” adding, “Outside directors, who are experts in capital allocation, must play a more active role.”