SEOUL, South Korea, March 18, 2022 /PRNewswire/ -- Chairman and CEO LEE Hong Joong of Hwasung Industrial Co. ("Hwasung") has announced he will be submitting a shareholder proposal at the regular shareholder meeting scheduled for March 31, 2022. The Chairman aims to increase shareholder value by laying the foundation for sustainable growth, securing the company's leadership in the construction industry, and enhancing the governance structure and capabilities of the board of directors (the "Board"). Chairman Lee joined the Hwasung in 1974 and has contributed to the company's growth into a highly respected general construction developer. He has played a major role in leading the company to its No.1 position in the Daegu Metropolitan area and a 43rd ranked construction firm in Korea as of 2020, based on the total value of contracts.
The shareholder proposal has been prepared with the intent to build on Hwasung's 64-year history of quality management, continue the legacy, and recover shareholder value, which Chairman Lee believes has been damaged by the board through the abuse of power and lack of transparency on the part of several board members.
Lee has demonstrated his expertise and management capabilities in all aspects of the construction industry and has watched the growth of Hwasung the past 48 years, most recently as the company chairman. He is seeking reappointment on the board and also asking for shareholder support for the appointment of Director of Construction Division SHIM Myeong Yong as an inside director. Shim is a construction expert with substantial leadership experience in major large-scale projects.
In addition, the proposal recommends PARK Jung-ho, an attorney, and KIM Chang-kwon, an accountant, for appointments as outside directors. Park and Kim are expected to bring expertise, independence, and impartiality, which are essential to mitigate the legal risks in construction and boost the competitiveness in ESG management. Chairman Lee sees the appointments as part of the plan to keep the management and Board members accountable to the shareholders and enhance the company's ability to create shareholder value.
During his tenure, Chairman Lee has played a crucial role in leading Hwasung through the 1997 Asian Financial Crisis, the 2008 Financial Crisis and also the selling of its distribution and retail business in 2010. He was also early to recognize the limitations of the traditional housing sector and was able to maximize profits through new projects outside the company's comfort zone. As of 2020, Hwasung has maintained a AAA credit rating with 47.2% of debt ratio, boasting the best financial health in the construction industry. In 2021, Hwasung exceeded 1 trillion won mark in cumulative value of contracts.
Building on the past successes, Chairman Lee is now focusing on the company's future. In 1994, the company established a R&D center, which now holds over a hundred patents and other intellectual properties. The company also participates in proptech forums and is pursuing collaborations with partners across different sectors including real estate, finance, IT and startup for future-focused ventures. Multiple collaborative projects are currently in progress, including environment projects in its home city of Daegu, where the company's ESG focus is materializing into tangible results.
Lee's management ability and leadership have led to the support for the shareholder proposal from Hwasung Industrial's all six of non-registered executive officers, all three of the siblings (of Honorary Chairman LEE In-Joong and President Chairman LEE Hong Joong himself), as well as all four members of the labor-management council.
Through this shareholder proposal, Chairman Lee is aiming to not only solidify the position of the company as a general construction developer, improve corporate governance and strengthen ESG commitments but also maintain checks and balances which can keep the management accountable.
Now, three out of the five directors on the current Board have been favorable to Honorary Chairman LEE In-Joong and President LEE Jong-Won, enabling unilateral and decision-making and improper operation of the board. The Chairman has deep concerns over the recent internal audit which found that President LEE Jong-Won has set up a company, Donga Ad, which functioned as an intermediary between Hwasung Industrial Co. and its advertising agency, charging a commission fee without providing any contribution or services. Hwasung has pressed charges and the matter is currently under investigation by the prosecutor's office.
Chairman Lee has created a website, BetterHwasung.com, to inform the public of the details of the shareholder proposal and to communicate directly with the shareholders. The website will provide a platform to speak out regarding ways to increase shareholder and corporate values and to speak to the shareholders regarding proxy voting for the upcoming regular shareholders meeting.
"Checks and balances, strong expertise in construction and expanded capabilities of the board of directors are essential to moving the company forward towards a legacy of a centennial company," said Chairman Lee. "In addition to improving corporate governance, I will work to resolve the family feud, and worth together with them to rediscover the true value that Hwasung stands for. After all, our company name means, 'Achieving Success Through Unity'."
