[E-Daily Reporter Kim Ji-woo ] Hong Won-sik, former chairman of NamyangDairyProducts, lost his lawsuit against NamyangDairyProducts(003920)seeking 44.35775 billion won in severance pay. The court dismissed the former chairman’s claim for severance pay in its entirety and ruled that Hong must instead return a portion of his compensation to NamyangDairyProducts.

On the 27th, Civil Division 41 of the Seoul Central District Court, in a lawsuit filed by former Chairman Hong against NamyangDairyProducts seeking executive severance pay, dismissed his claim in its entirety and ruled that former Chairman Hong must instead return 1.172 billion won to NamyangDairyProducts. This comes approximately two years and three months after former Chairman Hong filed the lawsuit in May 2024.

Former Chairman Hong’s side claimed severance pay based on NamyangDairyProducts’ executive severance pay regulations in effect at the time of his retirement. Under those regulations, severance pay was calculated by applying the monthly compensation at the time of retirement, along with the number of years in office and a payment rate specific to each job grade.

It was reported that while general executives were entitled to two months’ worth of monthly compensation for each year of service, a separate standard applied to the chairman, granting seven months’ worth. Mr. Hong’s legal team applied this formula to his tenure and compensation at the time of retirement, demanding 44.35775 billion won in severance pay.

This ruling partially upheld the counterclaim filed by NamyangDairyProducts against former Chairman Hong seeking the return of unjust enrichment equivalent to his 2023 and 2024 compensation. NamyangDairyProducts passed resolutions at its 2023 and 2024 annual general meetings of shareholders setting the compensation limits for directors, including former Chairman Hong. At the time, former Chairman Hong—who was the largest shareholder and an inside director—personally exercised his voting rights on these resolutions, which directly affected his own compensation.

The court ruled that former Chairman Hong had exercised his voting rights on a matter in which he had a “special interest” under the Commercial Act and, accordingly, annulled the shareholders’ meeting resolutions regarding the 2023 and 2024 director compensation caps. Both rulings have become final.

Meanwhile, following the “Bulgaris incident” in 2021, former Chairman Hong signed an agreement to sell the 53.08% stake in NamyangDairyProducts held by himself and his family to the private equity firm Han & Company for 310.7 billion won. However, after former Chairman Hong notified Han & Company of his intention to terminate the contract, the two parties engaged in a legal dispute over the transfer of shares.

In January 2024, the Supreme Court ruled in favor of Han & Company, and management control of NamyangDairyProducts was ultimately transferred to Han & Company. Former Chairman Hong stepped down from his position as chairman of NamyangDairyProducts in March of the same year.